Negotiation Techniques: The First Offer Dilemma in Negotiations

Negotiation techniques such as making the first offer is a debate among negotiation researchers

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negotiation techniques

The first offer dilemma in negotiations – should you make the first offer? Few questions related to negotiation techniques have yielded more academic attention and debate among practitioners in negotiation research.

One of the most common negotiation techniques: Don’t make the first offer, or risk “showing your cards” and perhaps unknowingly giving away some of the bargaining zone. Others provided experimental and real-world examples of negotiation evidence that making a first-offer allows you to “anchor” the negotiation favorably (anchoring in negotiation), particularly if you have a good sense of the bargaining range (see also, zone of possible agreement or ZOPA) and (even better) your counterpart does not.

In a series of negotiation technique research studies, researchers Ashleigh Shelby Rosette of Duke University, Shirli Kopelman of the University of Michigan, and JeAnna Abbott of the University of Houston provide evidence that might reconcile these competing perspectives. They asked MBA students to negotiate a single-issue price deal and recorded who made the first offer, the amount of the offer, and the deal outcome.


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Making First Offers, the Anchoring Effect in Negotiations, and Negotiation Success

Subjects then were asked questions about their emotional state, such as whether they felt anxious during negotiation scenarios and whether they were satisfied with the outcome. The negotiators who made first offers felt more anxiety than those who did not – and, as a result, were less satisfied with their outcomes. Yet, backing up prior bargaining studies, those who made first offers did better in economic terms than those who did not.

The implication?

Advantages of Anchoring in Negotiation

If you value only the economic outcome of your deal, make a first offer in order to anchor the negotiation in your favor. But if you value satisfaction with the negotiation process more than the outcome itself, you may want to avoid the stress and anxiety of making the first offer.

The authors also recommended finding a “personal antidote that would prevent feelings of anxiety from emerging altogether.” For example, “some negotiators may find it helpful to role-play making the first offer and repeat this behavior in a safe simulation setting until they feel comfortable enacting it in a real world negotiation.”

What are your opinions on making the first offer? Let us know in the comments.


Discover how to boost your power at the bargaining table in this FREE special report, Dealmaking: Secrets of Successful Dealmaking in Business Negotiations,
from Harvard Law School.


Originally published in 2012.

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Comments

4 Responses to “Negotiation Techniques: The First Offer Dilemma in Negotiations”

  • Firstoffer

    Great post! I really like the way you have explained each and everything so well. Very well done with the article!

    Reply
  • I wonder how prepared where the MBA students who made the first offer and what was the real cause of their anxiety. I can assume that when we make a high but reasonable first offer, we should not feel too anxious. However, in term of happiness, we might be anchoring OURSELVES to this high initial point. As it is unlikely that the other side is going to accept our first offer, we might be inclined to be unhappy comparing our starting point (high offer) & the result we get at the conclusion of the negotiation process. What do you think?

    Reply
  • Alan D.

    Besides the evidence re: anchoring, I believe making the first offer can be very productive. Many of my mediation participants are often reluctant to initiate with an offer. However, if the initial offer is framed as contingent on an exchange for something from the other side (ie. specific timing or payment, or a favorable payment plan, etc.), I believe it can be very effective, and injects a collaborative energy into the negotiations from the get-go.

    Reply
  • Ngoe E.

    In my humble opinion a first offer naturally should be made be made by the party initiating the deal as he makes the first step towards negotiations. This however is dependent on what system of negotiation you embark on. A collaborative approach will require all cards to be put on the table and this will involve value creation and the interests of both parties taken into consideration. Therefore irrespective of who makes the first offer, stress is eliminated as all things are summed up together

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