One of the most common power plays in negotiation is making the first offer. The probability of making a first offer is related to one’s confidence and sense of control at the bargaining table. Those who lack power, either due to a negotiation’s structure or a lack of available alternatives, are less inclined to make the first offer.
Power and confidence result in better outcomes because they lead negotiators to make the first offer. In addition, the amount of the first offer affects the outcome, with more aggressive or extreme first offers leading to a better outcome for the person who made the offer. Initial offers better predict final settlement prices than subsequent concessionary behaviors do.
But there are many ways to use power plays in negotiation. And attempts to exercise power can backfire. As a negotiator, you must balance these three risks against the potential benefits of developing and exercising power:
1. At the same time, you’re trying to exploit the bargaining power you think you have, your counterpart might view herself as the more powerful party.
- What happens when each side believes the other is on the verge of surrender? Merger attempts fail, labor strikes drag on, and lawsuits go to trial.
2. Resentment can cause the less powerful party to react emotionally to your coercive demands, refusing to make concessions even when it would be in his best interest (and yours) to do so.
3. When a negotiator who yields to greater strength feels she has been ill-treated, a seemingly successful exercise of power can damage relationships and reputations.
- The employer who convinces a candidate with a poor alternative to accepting a relatively low salary might find that short-term savings come with the baggage of a disaffected worker and future recruiting difficulties.
Related Article: When You Have All the Power
Partially adapted from “Should You Make the First Offer?” by Adam D. Galinsky (Professor, Northwestern University). First published in Negotiation Newsletter.