When to Make the First Offer in Negotiations

Although it’s often wise to take advantage of the anchoring effects of an ambitious price, the luxury real-estate market suggests times when it may pay to sit tight and wait for an offer.

PON Staff • May 11, 2026

In luxury real estate, sellers and their brokers sometimes make the unusual decision not to set an asking price but instead to ask buyers to make the opening bid, writes Katherine Clarke in the Wall Street Journal.

Given traditional advice on when to make the first offer in negotiations, this strategy may seem ill advised. Abundant research on the anchoring effect, documented by Amos Tversky and Daniel Kahneman, shows that the first number suggested in a negotiation has a strong impact on the final agreement. For this reason, negotiators are often advised to try to gain an advantage by making the first offer.

In fact, the answer to the question of whether to make the first offer is more nuanced than a clear yes or no. An in-depth analysis of your bargaining position and that of the other party is needed to determine the best course of action, given your situation.

Your BATNA and Beyond

When determining when to make the first offer in negotiations, begin by assessing your best alternative to a negotiated agreement, or BATNA (what you will do if you can’t reach a deal); your target, or aspiration; and your reservation price—your point of indifference between accepting a deal and pursuing your BATNA. Next, you will need to estimate your counterpart’s BATNA, target, and reservation price. That analysis will help you identify the zone of possible agreement, or ZOPA—the range of options that both sides would find acceptable.

When you believe you know more about the ZOPA than the other party, you generally should feel comfortable using the anchoring effect of an aggressive offer near the top of the ZOPA. This is typically the case for sellers who know a great deal about what they’re selling—and likely more than the buyer does. The longtime owner of a house generally should feel comfortable advertising an ambitious list price, for example.

By contrast, when your counterpart knows more about the ZOPA than you do, it will be difficult for you to drop an effective anchor. A job candidate, for instance, may be in the dark about the possible salary range for a given job relative to the recruiter. Because of the risk of asking for too little, the candidate might be wise to let the recruiter make a salary offer.

Similarly, homeowners may choose not to name their price because they simply aren’t sure of their property’s market value. Consider the case of an unfinished home that will take time to complete. To allow the asking price to fluctuate with the market over time, the seller might not state a price up front.

Advice for Sellers: Capitalize on Uniqueness and Scarcity

When a commodity is unique or offers special value to certain bidders, sellers may also see an advantage in allowing buyers to make the first offer.

In auction lingo, an item that offers different value to different bidders is known as a private-value asset. One bidder might want to procure the painting you’re selling as an investment piece, while another bidder may covet it because a distant relative was the artist. By contrast, common-value assets, such as an oil lease or a condo in a large new building, have more or less equal value to all bidders—the price may fluctuate over time, but it’s worth the same amount to all potential buyers in the present.

When a private-value asset is for sale, one or more bidders may be willing to pay much more than others would. If that’s a possibility, you might decide to leave the price unspecified and hope you can find at least one, and preferably several, of these bidders.

Relatedly, according to the scarcity principle, people are willing to pay more for rare items, such as a unique property or lunch with a celebrity auctioned off for charity. In his book Influence: Science and Practice, Robert B. Cialdini explains that “opportunities seem more valuable to us when they are less available.” Why? Because potential losses tend to loom larger in our minds than potential gains, we can feel highly motivated, even desperate, to avoid losing something we might not ever find again. Buyers may be tempted to bid high for scarce items, so sellers might want to let them open first.

Advice for Buyers: Consider Several Options

Turning to the buyer side, when a seller asks you to bid first or is cagey about disclosing the price, they may be hoping that emotion will drive your decision making. In such situations, you could end up overpaying and regretting your purchase.

To make more rational decisions, try to fall in love with several properties (or whatever commodity you’re shopping for) rather than just one, advises Harvard Business School Professor Max H. Bazerman. When you have one or two appealing BATNAs to turn to, you’ll be less tempted to overbid in the current negotiation. Moreover, if you believe the seller is less certain than you are about an item’s market value, try to persuade them to drop the first anchor, as it could be in your favor.

What other advice would you give on when to make the first offer in negotiations?

Teaching Negotiation

When Deceptive Tactics in Negotiation Arise from “Paranoid Pessimism

Are deceptive tactics in negotiation as common as we think? Here's what the research reveals as the reality in most situations.

PON Staff • April 27, 2026

You might assume that deceptive tactics in negotiation always originate from unscrupulous actors. But in fact, our own unwarranted suspicions could lead us to behavior unethically.

Business negotiators often worry about deceptive tactics in negotiation and understandably so. The potential for being lied to or swindled can be high in business negotiations, given that our counterparts often have access to information that we lack, such as a product’s (lack of) quality or a looming price hike.

Interestingly, research by Columbia Business School professor Malia F. Mason and her colleagues suggests we may be able to reduce our odds of being deceived in negotiation by:

Demonstrating our trustworthiness and emphasizing the importance of ethical behavior
Recognizing that our expectations of our counterparts’ ethics may be unnecessarily cynical

How Pessimism Sets the Stage for Deceptive Tactics in Negotiation

Mason and her team identify two main reasons why people might expect to encounter deceptive tactics in negotiation:

Expectations of deceit. They could believe that lying is appropriate in the negotiation contexts in which they find themselves. If they do, they would become more likely to be opportunistic—to lie in the hope of gaining an advantage.
Pessimistic views. Negotiators could believe that deception is unethical and wrong, but that their counterparts are likely to try to cheat them anyway—that is, they could have pessimistic beliefs about other people’s ethicality.

The researchers then tested which theory is more accurate by surveying diverse groups of people: American MBA students, a broader sample of American adults, senior managers at nonprofits, Chinese undergraduate students, and Turkish executives. The results showed that only a small percentage of each group (7.69%, on average) believed deceptive tactics in negotiation to be appropriate behavior. At the same time, survey respondents pessimistically expected that a much larger percentage of their peers—22.77%, on average—would view deception as appropriate. In other words, they had overly pessimistic expectations of being deceived.

If we enter a negotiation believing there’s a good chance we’ll be deceived, we might decide to deploy unethical tactics as a defensive tactic, Mason and colleagues theorized. Indeed, that is what they found in three other experiments.

In one of the experiments, some participants first were told that a recent survey had found that most people view deception as acceptable in negotiation; other participants were told that most people view deception as unacceptable. Next, all participants played the role of the seller of a used car in an online negotiation simulation. During the simulation, participants had an opportunity to deceive their counterpart about the condition of the car to try to get a higher sale price.

The results showed that participants who had been led to believe that deception is a commonly accepted tactic were more likely to lie as compared to participants who were led to believe that most people view deception as unacceptable.

Beyond Paranoia

Overall, the results of this and the other experiments by Mason and colleagues suggest that people are significantly more likely to approach negotiation with pessimism about being deceived than they are to approach it opportunistically. The authors call this tendency “paranoid pessimism,” as it’s not rooted in reality: In fact, other people are less tolerant of unethical behavior and deceptive tactics in negotiation than we believe them to be.

Ironically, however, paranoid pessimism can lead us to adopt unethical negotiation tactics as a defensive measure against behavior that doesn’t actually exist, which suggests that unethical behavior can become a vicious cycle.

This phenomenon points to a possible remedy for reducing unethical behavior: Encourage people to believe, as is the case, that most negotiators believe dishonesty is wrong. When norms for honesty are made salient, people should become less pessimistic about their counterpart’s ethicality and, consequently, more honest themselves. Such a strategy doesn’t account for the fact that people often justify and overlook their own dishonesty, but it could be a helpful first step toward curbing lies and misrepresentation.

What are your own expectations of the likelihood that your counterparts will engage in deceptive tactics in negotiation?

Teaching Negotiation

Make Job Negotiations Fairer in Your Organization

Harvard Kennedy School professor and Academic Dean, Iris Bohnet, overviews steps professionals can take to promote wiser, more equitable job negotiations.

PON Staff • March 30, 2026

In many organizations, policies and systems perpetuate gender and racial discrimination and inequality—often without leaders even recognizing it. When job negotiations and promotions are inequitable, they often lead the dominant group to be compensated more than others for the same work.

In their book, Make Work Fair: Data-Driven Design for Real Results, Harvard Kennedy School Professors Iris Bohnet and Siri Chilazi write that many organizations focus on investing in short-term DEI (diversity, equity, and inclusion) training to address inequity and overlook the types of systemic solutions that would lead to fairer decision-making day in and day out.

In an interview with the Program on Negotiation, Bohnet, who is also the author of What Works: Gender Equality by Design, overviews steps professionals can take to promote wiser, more equitable job negotiations.

Program on Negotiation: In the news, we sometimes find examples of how individuals have sought to improve gender and racial equality in their organizations during job negotiations. For example, in recent years, some Hollywood actors and directors promised to negotiate for riders in their contracts with production companies that would guarantee diverse hiring for small parts. To what extent do you think such negotiations and initiatives are useful?

Iris Bohnet: When women fail to negotiate on their own behalf, it’s often because they perceive that doing so is risky—that they may face a backlash for asking for more by behaving contrary to gender stereotypes of women as passive and accommodating. So when other people negotiate on behalf of women and other underrepresented groups in organizations, as is the case with so-called inclusion riders, it can be helpful for everyone.

However, individual workplace negotiations can take us only so far. As my coauthor, Siri Chilazi, and I write in Make Work Fair, there is much more that can be done within organizations through “behavioral design”—systemic changes aimed at reducing bias and improving equity. Behavioral design, which Richard Thaler and Cass Sunstein referred to as “choice architecture” in their influential book Nudge: Improving Decisions About Health, Wealth, and Happiness, involves creating decision environments that help us better meet our goals.

PON: What’s one example?

IB: Until recently, women made up only a very small percentage of major U.S. orchestras. Women were auditioning, but decision-makers were biased toward hiring men. This became clear when orchestras started instituting blind auditions where musicians try out behind a screen so that their gender is unknown to those listening. After this change, the percentage of women in the top five U.S. orchestras climbed from 5% to 35%. As this example illustrates, behavioral design bypasses the need to reduce bias in people’s decision-making—bias of which we tend to be unaware and, in fact, often vehemently deny in job negotiations.

In most fields, a completely blind hiring process wouldn’t make sense, but we can at least anonymize the initial screening process. We encourage organizations to institute “electronic curtains” by removing gender- and race-identifying information from electronic job applications before they are first reviewed, including names, pronouns, and headshots.

PON: Eventually, hiring managers will need to interview candidates, and their gender and race will be obvious. How can organizations “debias” job negotiations?

IB: In part, by requiring decision-makers to conduct structured rather than unstructured interviews. We all like to think we’re a good judge of character, but study after study shows that unstructured interviews are a very poor predictor of on-the-job performance. By contrast, structured interviews allow for far more accurate comparisons across candidates.

To conduct structured job interviews, hiring managers should determine what they are looking for in a candidate in advance. Next, they should write up a checklist of interview questions. The next step is to create a scoring system—for example, a scale of 1 to 10—for each interview question and determine how much weight to assign to each question.

During the interview, interviewers should adhere closely to their list of questions, even when it feels awkward to do so. They should score the candidate in the moment, one question at a time, as waiting until after the interview risks allowing faulty memories to bias the process. If multiple people will be conducting interviews, they should meet with the candidate individually rather than as a group. Then, before meeting to discuss the candidate, interviewers should send one another their evaluations in advance, before they are diluted by groupthink.

PON: What would you say to those who might think this sounds like a complicated approach to job negotiations?

IB: Hiring the wrong people creates much more complication. Online tools for conducting structured interviews are available. Most of us put too much faith in our intuition. When we add algorithms and routinized procedures to the hiring process, we reduce the bias in our job negotiations. In doing so, we not only promote equity but also are more likely to hire the best person for the job.

What steps have you taken in your organization to make job negotiations fairer?

Negotiation Skills

How to Negotiate via Text Message

Texting is becoming a ubiquitous mode of communication in business negotiations. An expert on the topic offers best practices for how to negotiate via text and incorporating texts into our dealmaking.

PON Staff • January 22, 2026

Do you negotiate via text message?

If you’re early in your career, there’s a good chance you could easily scroll through message threads full of discussions about issues, offers, and compromises. If you’re a bit further along, you might instinctively answer no. And yet, a closer look at the saved messages on your smartphone may tell a different story.

You may have recently negotiated the division of chores with a family member, texted with a stranger about the sale of a used car or other item, or messaged a colleague about swapping shifts, deadlines, or responsibilities.

Whether or not we like it, texting has become an increasingly common tool in business communications and negotiation. In a chapter in the book The Negotiator’s Desk Reference, Vol. 2 (DRI Press, 2017), Creighton University professor Noam Ebner encourages the skeptical to view texting not as a sign of society’s decreased formality and civility but as one more tool we can use to improve the efficiency and outcomes of our negotiations.

The hidden richness when you negotiate via text

A relatively young communication mode, texting traces its roots to instant-messaging programs and chat rooms of the mid-1990s before migrating from computers to mobile phones in the early 2000s. Today, in addition to SMS (short message service), many people routinely negotiate through private messaging on platforms such as Facebook, X (formerly Twitter), LinkedIn, and a growing array of workplace collaboration tools.

In regions where cellular service is limited or unreliable, Internet-based messaging apps such as WhatsApp and similar platforms have increasingly replaced SMS as the dominant form of text-based communication, Ebner notes.

The ability of texting to connect people across distances at virtually any moment has made it ubiquitous in personal life and, increasingly, in business. That said, it comes with notable drawbacks. Like email, texts lack the rich visual and vocal cues that in-person meetings, phone calls, and video conferences provide. Without tone of voice, facial expressions, and body language, negotiators may struggle to build rapport, and misunderstandings or frustration can arise more easily.

Texts also lack some of the formatting tools that make longer written communication clearer—such as headings, bullet points, and emphasis—although emojis, GIFs, voice notes, and images now offer partial substitutes. Even so, texting remains an informal medium. The small screen, the ease of rapid replies, and the risk of typos encourage short, stripped-down messages that often omit greetings and sign-offs. To some, this brevity can feel abrupt or even rude.

Given these limitations, texting might seem like an unpromising means of negotiating. Yet it also offers real advantages.

Texting allows negotiators to communicate instantly about logistics, ideas, or offers at times when a phone call would be disruptive or impractical. People who are shy or conflict-averse may find it easier to assert themselves in writing than face-to-face. And younger negotiators—who tend to text frequently—often report feeling more comfortable expressing emotions via text than through other media, according to research by Jennifer Crosswhite of the National Council on Family Relations and her colleagues.

Another advantage of texting is its flexibility of pace. A text exchange can unfold rapidly, like a phone conversation, or slowly, with time to think between messages. Ebner points to research suggesting that “fast talkers”—negotiators who think quickly and come prepared with well-developed arguments—often do well eliciting concessions via text. By contrast, those who prefer reflection can deliberately slow the pace by delaying responses and planning their next move.

How to negotiate via text

For most business negotiations, it’s usually wise to begin with at least one face-to-face meeting. When that isn’t possible, starting with phone or video conversations can help establish rapport and shared understanding before shifting to text.

If and when you decide to negotiate via text, the following three guidelines from Ebner can help you do so more effectively.

1. Proofread your messages. One of texting’s greatest strengths—speed—is also one of its biggest hazards. Misspellings, typos, and autocorrect errors are common. Ebner recounts a moment when his phone replaced the negotiation term BATNA (best alternative to a negotiated agreement) with BANTHA, the woolly mammoth–like creature from Star Wars. “My suggestion that we share these with each other received the electronic equivalent of a raised eyebrow,” he writes. Before hitting “send,” review every message carefully and double-check that it’s going to the intended recipient.
2. Don’t take offense. Many people—especially those over 30—find the informality of texting jarring. Abbreviations (LOL, BRB, SMH), emojis, slang, and incomplete sentences can trigger concerns about professionalism. Ebner’s advice is blunt: “Get over it.” Norms about appropriate communication are shaped by culture and experience, and not long ago many professionals were equally uneasy about negotiating by email. If texting conventions bother you, raise the issue directly or suggest switching to email or phone. Above all, Ebner cautions, do not assume disrespect or unprofessionalism based solely on a counterpart’s texting style.
3. Give them the benefit of the doubt. Delays in response or messages that seem curt are common sources of irritation. Before jumping to conclusions, consider that your counterpart may be in a meeting, multitasking, or temporarily unable to respond. Because people tend to overinterpret silence—especially during exchanges of offers—Ebner recommends setting expectations upfront. For example, you might agree to let each other know when more time is needed to craft a thoughtful response. Doing so can reduce unnecessary suspicion and keep negotiations on track.

Do you negotiate via text? Has it ever gone awry? Please share your experience in the comments below.

Negotiation Briefings Articles

Ask a Negotiation Expert: Debiasing Job Negotiations

PON Staff • May 31, 2018

In many organizations, policies and systems perpetuate gender and racial discrimination and inequality, including higher pay for white men as compared to others for the same work. This month, Harvard Kennedy School professor Iris Bohnet, the author of What Works: Gender Equality by Design (Belknap Press, 2016), overviews steps professionals can take to promote wiser,more equitable hiring negotiations.

Negotiation Briefings: In the cover story of our May issue, we discussed ways in which individuals may be able to improve gender and racial equality in organizations when negotiating their own employment terms. For example, some Hollywood actors and directors are promising to negotiate for “inclusion riders” in their contracts with production companies that guarantee diverse hiring for small parts. To what extent do you think such negotiations and initiatives are useful?

Iris Bohnet: When women fail to negotiate on their own behalf, it’s often because they perceive that doing so is risky—that they may face a backlash for asking for more by behaving contrary to gender stereotypes of women as passive and accommodating. So when other people negotiate on behalf of women and other underrepresented groups in organizations, it can be helpful for everyone.

However, individual negotiations can take us only so far. There is much more that can be done within organizations through “behavioral design”—systemic changes aimed at reducing bias and improving equity. Behavioral design, which Richard Thaler and Cass Sunstein refer to as “choice architecture” in their influential book Nudge: Improving Decisions About Health, Wealth, and Happiness (Penguin, 2009), involves creating decision environments that help us better meet our goals.

NB: What’s one example?

IB: Until recently, women made up only a very small percentage of major U.S. orchestras. Women were auditioning, but decision makers were biased toward hiring men. This became clear when orchestras started instituting blind auditions where musicians try out behind a screen so that their gender is unknown to those listening. After this change, the percentage of women in the top five U.S. orchestras climbed from 5% to 35%. As this example illustrates, behavioral design bypasses the need to reduce bias in people’s decision making—bias of which we tend to be unaware and, in fact, often vehemently deny.

In most fields, a completely blind hiring process wouldn’t make sense, but we can at least anonymize the initial screening process. I encourage organizations to institute “electronic curtains” by removing gender- and race-identifying information from electronic job applications before they are first reviewed, including names, pronouns, and head shots.

NB: Eventually, hiring managers will need to interview candidates, and their gender and race will be obvious. How can organizations “debias” hiring interviews?

IB: In part, by requiring decision makers to conduct structured rather than unstructured interviews. We all like to think we’re a good judge of character, but study after study shows that unstructured interviews are a very poor predictor of on-the-job performance. By contrast, structured interviews allow for far more accurate comparisons across candidates.

To conduct structured job interviews, hiring managers should determine what they are looking for in a candidate in advance. Next, they should write up a checklist of interview questions. The next step is to create a scoring system—for example, a scale of 1 to 10—for each interview question and determine how much weight to assign to each question. During the interview, interviewers should adhere closely to their list of questions, even when it feels awkward to do so. They should score the candidate in the moment, one question at a time, as waiting until after the interview risks allowing faulty memories to bias the process. If multiple people will be conducting interviews, they should meet with the candidate individually rather than as a group. Then, before meeting to discuss the candidate, interviewers should send one another their evaluations in advance, before they are diluted by groupthink.

NB: What would you say to people who might think this sounds complicated?

IB: Hiring the wrong people creates much more complication. Online tools for conducting structured interviews are available, including Applied from the U.K. Behavioural Insights Team. Most of us put too much faith in our intuition. When we add algorithms and routinized procedures to the hiring process, we reduce the bias in our negotiations. In doing so, we not only promote equity but also are more likely to hire the best person for the job.

Negotiation Briefings Articles

Negotiation research you can use: To curb dishonesty in negotiation, confront “paranoid pessimism”

PON Staff • May 31, 2018

Business negotiators often worry about being deceived, and understandably so. The potential for being lied to or swindled can be high in negotiation, given that our counterparts typically have access to information about preferences, alternatives, product quality, and so on, that we lack. Yet research shows that negotiators often behave honestly even when doing so costs them money.

Interestingly, we may be able to reduce our odds of being deceived in negotiation by helping our counterparts become more optimistic that we’ll be honest ourselves, suggests new research by Columbia Business School professor Malia F. Mason and her colleagues.

How pessimism breeds deception

Mason and her team identify two main reasons why people might expect to be deceived in negotiation. First, they could believe that lying is appropriate in the negotiation contexts in which they find themselves. If they do, they would become more likely to be opportunistic—to lie in the hope of gaining an advantage. Second, negotiators could believe that deception is unethical and wrong but that their counterparts are likely to try to cheat them anyway—that is, they could have pessimistic beliefs about other people’s ethicality.

Surveying diverse groups of people— American MBA students, a broader sample of American adults, senior managers at nonprofits, Chinese undergraduate students, and Turkish executives—the researchers found that only a small percentage of each group (7.69%, on average) believed deception to be an appropriate negotiation behavior. Yet survey respondents pessimistically expected that a much larger percentage of their peers—22.77%, on average—would view deception as appropriate. In other words, they had overly pessimistic expectations of being deceived.

If we enter a negotiation believing there’s a good chance we’ll be deceived, we might decide to deploy unethical tactics as a defensive tactic, Mason and colleagues theorized. Indeed, that is what they found in three other experiments. In one, some participants first were told that a recent survey had found that most people view deception as acceptable in negotiation; other participants were told that most people view deception as unacceptable. Next, all participants played the role of the seller of a used car in an online negotiation simulation. During the simulation, participants had an opportunity to deceive their counterpart about the condition of the car to try to get a higher sale price. Participants who had been led to believe that deception is a commonly accepted tactic were more likely to lie as compared to participants led to believe that most people view deception as unacceptable.

Beyond paranoia

Overall, the results suggest that people are significantly more likely to approach negotiation with pessimism about being deceived than they are to approach it opportunistically. The authors call this tendency “paranoid pessimism,” as it’s not rooted in reality: Others are less tolerant of unethical behavior than we believe. Ironically, however, paranoid pessimism can lead us to adopt deceptive tactics as a defensive measure.

This phenomenon points to a possible remedy for reducing unethical behavior: Encourage people to believe, as is the case, that most negotiators believe dishonesty is wrong. When norms for honesty are made salient, people should become less pessimistic about their counterpart’s ethicality and, consequently, more honest themselves. Such a strategy doesn’t account for the fact that people often justify and overlook their own dishonesty, but it could be a helpful first step toward curbing deliberate lies.

Source: “From Belief to Deceit: How Expectancies about Others’ Ethics Shape Deception in Negotiations,” by Malia F. Mason, Elizabeth A. Wiley, and Daniel R. Ames. Journal of Experimental Social Psychology, 2018.

Negotiation Briefings Articles

For Sellers, Staying Mum on Price Can Offer Hidden Advantages

Although it’s often wise to anchor buyers with an ambitious price, the luxury real-estate market suggests times when it may pay to sit tight and wait for an offer.

PON Staff • May 31, 2018

Imagine yourself in a dilemma that only a privileged few get to experience: You’ve fallen in love with a dazzling, one-of-a-kind home that’s on the market, but it doesn’t have a listing price. Instead, the seller’s broker is encouraging you to name what you’re willing to pay. An offer well into the millions seems expected, but how high will you need to bid? Without an asking price, you feel unmoored and unsure of where to begin—yet desperate to win the prize.

Refusing to attach a sale price to a property is an unusual but not unheard-of practice in luxury real estate, writes Katherine Clarke in a recent New York Times article. For particularly desirable or unique properties, sellers and their brokers may choose to let buyers make the opening bid rather than anchoring with a list price.

Alternatively, sellers may advertise the price as “available upon request,” meaning only shoppers who have visited the property and are seriously interested should inquire. In 2015, for example, real-estate agent Michael Dreyfus listed a home in Palo Alto, California, with the price available on request. He believed $5.5 million was an appropriate asking price for the home, but its interiors had just undergone a stunning redesign, and he and the owner believed that if they could get people through the door, someone would fall in love with the home and bid much higher. Though Dreyfus admits he “did get laughed at a bit” when he disclosed the $7.5 million asking price to visitors, the house eventually sold for $7 million.

Beyond the world of high-end real estate, the decision to keep price under wraps raises interesting questions about when sellers should disclose price and when they should keep it hidden.

Beyond anchors

At first glance, it would seem that a home seller who fails to disclose a home’s price has it all wrong. Abundant research on the anchoring effect, documented by psychologists Amos Tversky and Daniel Kahneman, shows that the first offer made in a negotiation serves as an anchor that has a strong effect on the final price. For this reason, negotiators are often advised to try to gain an advantage by making the first offer.

Moreover, some brokers caution that leaving a home unpriced limits the pool of buyers, as it cannot be listed on popular online real-estate websites, such as Zillow, Trulia, and Realtor.com, without a price. Sotheby’s International Realty senior marketing VP Bradley Nelson told the Times that not naming a price is “like being half pregnant” and can reflect owners’ ambivalence about whether they really want to sell.

In fact, the answer to the question of whether to make the first offer is more nuanced than a clear yes or no. An in-depth analysis of your bargaining position and that of the other party is needed to determine the best course of action, given your situation.

First, you need to assess your best alternative to a negotiated agreement, or BATNA; your target; and your reservation price—your point of indifference between accepting a deal and pursuing your BATNA. Next, you will need to estimate your counterpart’s BATNA, target, and reservation price. That analysis will help you identify the zone of possible agreement, or ZOPA— the range of options that both sides would find acceptable.

When you believe you know more about the ZOPA than the other party, you generally should feel comfortable dropping an aggressive anchor, one near the top of the ZOPA. This is typically the case for sellers who know a great deal about what they’re selling—and likely more than the buyer does. The longtime owner of a house generally should feel comfortable advertising an ambitious list price, for example.

By contrast, when your counterpart knows more about the ZOPA than you do, it will be difficult for you to drop an effective anchor. A job candidate, for instance, may be in the dark about the possible salary range for a given job relative to the recruiter. Because of the risk of asking for too little, the candidate might be wise to let the recruiter make a salary offer.

Similarly, homeowners may choose not to name their price because they simply aren’t sure of their property’s market value. Take the case of an unfinished home that will take time to complete. To allow the asking price to fluctuate with the market over time, the seller might not state a price up front.

Capitalizing on uniqueness and scarcity

When a commodity is unique or offers special value to certain bidders, sellers may also see an advantage in allowing buyers to bid first. As we saw earlier, that’s what real-estate agent Michael Dreyfus anticipated when he put the newly designed Palo Alto home on the market.

In auction lingo, an item that offers different value to different bidders is known as a private-value asset. One bidder might want to procure the painting you’re selling as an investment piece, while another bidder may covet it because his great-grandmother was the artist. By contrast, common-value assets, such as an oil lease or a condo in a large new building, have more or less equal value to all bidders—the price may fluctuate over time, but it’s worth the same amount to all potential buyers in the present.

When a private-value asset is for sale, one or more bidders may be willing to pay much more than others would. If you think that’s a possibility, you might decide to leave the price unspecified and hope you can find at least one, and preferably several, of these bidders.

Relatedly, according to the well-documented scarcity principle, people are willing to pay more for items that are rare, such as a unique property or lunch with a celebrity auctioned off for charity. In his book Influence: Science and Practice (2009, Pearson), Robert B. Cialdini explains that “opportunities seem more valuable to us when they are less available.” Why? Because potential losses tend to loom larger in our minds than potential gains, we can feel highly motivated, even desperate, to avoid losing something we might not ever find again. Buyers may be tempted to bid high for scarce items, so sellers might want to let them open first.

Advice for buyers

Turning to the buyer side, when a seller asks you to bid first or is cagey about disclosing the price, keep in mind that she may be hoping that emotion will drive your decision making. In such situations, you could end up overpaying and regretting your purchase.

To make more rational decisions, try to fall in love with several properties (or whatever commodity you’re shopping for) rather than just one, advises Harvard Business School professor Max H. Bazerman. When you have one or two appealing BATNAs to turn to, you’ll be less tempted to overbid in the current negotiation. Moreover, if you believe the seller is less certain than you are about an item’s market value, try to persuade him to drop the first anchor, as it could be in your favor.

3 more reasons to be vague about price

A seller may choose to skip the price tag for several other reasons:

1. Privacy concerns. You might want to keep the price under wraps to reduce the amount of information that’s publicly available about your assets and finances. In an era where home prices are typically just a click away on the Internet, privacy concerns can motivate sellers of luxury homes to skip the listing price, according to the New York Times.

2. Getting them through the door. Allowing people to fall in love with an expensive item before they experience sticker shock is a common sales tactic. “If you have to ask, you can’t afford it,” goes the old adage. That’s not necessarily true, but getting customers emotionally attached to your product before revealing its price does make strategic sense.

3. Generating a buzz. Upending the conventions of negotiation for a given item can make it seem unique. By creating an air of mystique around a commodity, you can help it stand out from the pack and perhaps drive up the price.

Negotiation Briefings Articles

To Text or Not To Text? These Days, There’s No Question

Texting is becoming a ubiquitous mode of communication in business negotiations. an expert on the topic offers best practices for incorporating texts into our dealmaking.

PON Staff • May 31, 2018

Do you negotiate via text? If you’re a young person early in your career, there’s a good chance you could easily pull up message strings full of discussions about issues and offers. If you’re a little older, you might have answered no. Even so, if you took a closer look at the saved text messages on your smartphone, you might find you’ve recently negotiated the division of chores with a family member, texted with a stranger about the sale of a used car or other item, or messaged a colleague about swapping shifts or responsibilities.

Whether or not we like it, texting is an increasingly common tool in business communications and negotiation. In a chapter in the book The Negotiator’s Desk Reference, Vol. 2 (DRI Press, 2017), Creighton University professor Noam Ebner encourages the skeptical to view texting not as a sign of society’s decreased formality and civility but as one more tool we can use to improve the efficiency and outcomes of our negotiations.

The hidden richness of texting

A relatively young communication mode, texting originated in the instant- messaging programs and chat rooms of the mid-1990s, eventually migrating from computers to mobile phones in the early 2000s. These days, in addition to tapping out SMS (short message service) messages on our smartphones, many of us also send private messages on Facebook, Twitter, and other apps. In areas of the world where cellular service is spotty or unavailable, Internet-based messaging apps such as WhatsApp are replacing SMS as the main form of text communication, writes Ebner.

The ability of texting to connect people in far-flung locations at any moment of the day has made it ubiquitous in personal and, increasingly, business communications, despite some notable drawbacks. Like e-mails, texts lack the rich visual and vocal cues that other communication modes, such as in-person meetings and phone calls, can provide. When we don’t have body language, tone of voice, eye contact, and other cues to rely on to help us “read” others, we can have trouble building rapport. In addition, misunderstandings, frustration, and conflict can become more likely.

Texts also lack some features of e-mails that enhance communication, including bolding, underlining, and bullet points, although we can use emojis, GIFs, and photo attachments to enhance our texts. Speaking of emojis, texts tend to be a highly informal means of communicating. The hassle of typing on a small screen and potential for errors encourage succinct messages that lack the conventions of other written correspondence, including salutations and sign-offs. As a result, texts seem abrupt and impolite to some.

The ability of texting to connect people in far-flung locations at any moment of the day has made it ubiquitous in personal and, increasingly, business communications, despite some notable drawbacks.

Given those features, texting might seem like an unpromising means of negotiating. Yet texting has some notable advantages for negotiators. It offers the ability to reach out instantaneously across the miles regarding logistics, ideas, or offers at times when a phone call might be impossible or disruptive. People who are shy or conflict averse may find they can assert themselves better in texts than in person. And young people, who tend to text frequently, report feeling more comfortable expressing their emotions through texts as compared to other media, research by Jennifer Crosswhite of the National Council on Family Relations and her colleagues shows.

Another advantage of texting, as compared to many other media, is that it allows for both fast and slow communication. We can carry out a text conversation synchronously, like a phone conversation, or take time to think between messages. Ebner cites research showing that negotiators who are “fast talkers”—those who have well- planned arguments ready to deploy and who think on their feet—are skilled at eliciting concessions from their counterparts via text. By comparison, those who like to take time to plot strategy can delay their responses and slow down the pace.

Integrating texts into your negotiations

For most business negotiations, it’s usually wise to begin with one or more face-to-face meetings. If connecting in person isn’t possible, start with phone calls or videoconferences before adding texts and e-mails to the mix. Visual and vocal cues will enhance rapport and understanding right from the start. If and when you feel like texting, the following three guidelines from Ebner will help you do so effectively:

- 1. Proofread your messages. One advantage of texting—the ability to dash off messages on the run— results in one of its frequent pitfalls: misspellings and embarrassing autocorrect errors. Ebner, for instance, describes the time his smartphone’s autocorrect feature replaced the negotiation term BATNA (best alternative to a negotiated agreement) with BANTHA, the woolly mammoth–type creature from the Star Wars films. “My suggestion that we share these with each other received the electronic equivalent of a raised eyebrow,” he writes. Before hitting “send,” make it a policy to review every message for mistakes and to check that it’s going to the right person.

- 2. Don’t take offense. It’s common for older adults (and by “older,” we mean over 30!) to be annoyed by the casual liberties that younger people use when texting. Text abbreviations (LOL, SMH, BRB, etc.), emojis, incomplete sentences, and slang can leave us wondering what the business world is coming to.
  Ebner’s advice? “Get over it.” He says, “Our assumptions about what is appropriate and what is not are rooted in our own culture and experience.” Not so long ago, after all, many people felt uncomfortable doing business via e-mail. If you’re uncomfortable with certain conventions of texting, address the issue directly or ask to switch to e-mail or phone. Above all, “do not infer disrespect, inappropriateness, unprofessional behavior, or uncouth behavior” from a counterpart’s informal texts, Ebner recommends.

3. Give them the benefit of the doubt. A similar guideline applies to long delays between text messages and messages that seem curt. Rather than taking offense, consider that your counterpart may be typing under the table at a meeting or unable to text at all, recommends Ebner. Just because people have their phones on them most of the time doesn’t mean they’re free to engage with you. We all tend to overthink people’s intentions, especially in tense situations, such as an exchange of offers. You might avoid the suspicion and negativity that can be triggered by aspects of texting by agreeing with your counterpart that you’ll let each other know when you need some time to respond at length.

Negotiation Briefings Articles

Deflated by your deal? Get them back to the table

Convincing a counterpart to renegotiate a deal that’s not working in your favor isn’t easy. President Trump is using threats to redo U.S. trade deals, but they aren’t the only option.

PON Staff • May 31, 2018

According to U.S. president Donald Trump, trade pacts forged by past American presidents have left the nation with a slew of raw deals. To reduce trade deficits, the president announced on March 1 that he would be imposing tariffs on imported steel and aluminum, a move that would impact China, Europe, and Canada in one fell swoop. To justify the exemptions to ongoing trade deals that the tariffs would require, Trump cited national security concerns.

China responded with muted criticism, while European nations threatened to retaliate. A week later, the White House said it would give Canada and Mexico temporary exemptions from the tariffs.

On March 20, Trump imposed $60 billion in tariffs on other Chinese imports. China declared it would retaliate by imposing duties of up to $3 billion on U.S. imports and cautioned the United States to “pull back from the brink,” according to the New York Times. Trump issued a temporary reprieve on the steel and aluminum tariffs for South Korea, Europe, and other U.S. allies.

The tit for tat escalated on April 1, when China imposed tariffs on more than 100 U.S. products, which led the Trump administration to slap an additional $50 billion in tariffs on other Chinese products. China once again retaliated with more tariffs on U.S. goods. On April 5, Trump said he was considering import taxes on $100 billion worth of Chinese goods in an effort to reduce the nation’s $375 billion trade deficit with China.

As the penalties piled up, the U.S. stock market slumped, and business groups called on Trump to back down, citing the potential damage tariffs could inflict on U.S. agriculture and other industries. The administration said it was open to negotiating a resolution to the dispute with China. But whether a deal could be reached before the threats escalated into a full-scale trade war remained to be seen.

One of the most daunting challenges negotiators can face is to convince a counterpart to revisit a deal that’s already in place. You may be angry about lopsided commitments or broken promises, but if an agreement is still in force, it may seem as if there’s little you can do to get the other side’s attention, short of an expensive and risky lawsuit.

Even if a contract is expiring and it’s time to negotiate a new one, the existing agreement will likely serve as an anchor that’s hard to ignore. Animosity over broken promises and perceptions of unfair treatment can make trust hard to come by. “If negotiation is about sharing expected benefits, renegotiation is almost always about allocating a loss,” Tufts University professor Jeswald Salacuse writes in his book Negotiating Life: Secrets for Everyday Diplomacy and Deal Making (Palgrave Macmillan, 2013). And negotiation research shows that we tend to be less collaborative when negotiating over losses as compared to potential gains.

To try to rebalance deals they think are lopsided, negotiators often resort to attention-getting moves such as threats and punitive measures. Trump’s steel and aluminum tariffs, as well as the additional tariffs he’s imposed on China, appear to be a case in point. Because it would take months for the tariffs to go into effect on either side, they may be intended as nothing more than a bargaining chip that easily can be negotiated away.

Indeed, this past winter, Trump used threats to compel South Korea to work quickly with his administration to revise the nations’ bilateral trade agreement. We take a closer look at this negotiation and suggest strategies for business negotiators who feel similarly trapped in a bad deal.

Seizing Trump’s card

Since the U.S.–South Korea free trade agreement, known as KORUS, took effect in 2012, America’s trade deficit with South Korea has doubled. Trump warned he would back out of the deal and reinstate the threatened steel tariffs if South Korea didn’t agree to negotiate more favorable terms. South Korean officials traveled to Washington, D.C., in February to try. Time was of the essence: The two countries had scheduled separate talks with North Korea regarding its nuclear program in the spring and wanted to be able to present a united front when facing off with North Korean leader Kim Jong-un.

But the U.S.–South Korea talks on KORUS got off to a rocky start. U.S. negotiators “kept asking us to make concessions unilaterally,” which left the mood “as cold as Siberia,” South Korean trade minister Kim Hyun-chong later recalled on Facebook. South Korean negotiators felt stuck. The threat of a canceled trade deal “would have been an absolute nightmare,” one South Korean official told the New York Times. But without a concession from the United States, South Korea would have difficulty selling a renegotiated deal to its people. Talks eventually stretched from one week to four.

Ultimately, Trump’s threatened steel tariffs “provided an opening,” the official told the Times. South Korea offered to give U.S. automakers and pharmaceutical firms greater access to its market in exchange for becoming the first country to officially be exempt from the steel tariffs. “We made concessions in autos that we saw as inevitable anyway,” the South Korean official said. “This suddenly becomes a win-win.”

After the breakthrough in late March, “our relations developed into something like a bromance,” according to Kim. Trump praised the deal but said he might delay its signing until after reaching an agreement with North Korea on denuclearization. U.S. officials reportedly are concerned that South Korea may not push the North hard enough in its talks. Using the unsigned trade deal as a trump card, so to speak, might help the White House motivate the South to stay in lockstep on North Korea.

Guidelines for redoing the deal

At this writing, the U.S. trade deal with South Korea is unsigned, and the future of U.S.–China trade relations is up in the air. Still, the developments thus far lead to some useful conclusions about renegotiation, which we combine here with more general advice from Tufts professor Salacuse. The first two suggestions are aimed at helping you avoid the need to renegotiate by setting up a better deal the first time around. The remaining three tips focus on getting your counterpart back to the table and securing better terms.

1. Insist on short-term contracts, when possible. In 2008, the City of Chicago, under then-mayor Richard M. Daley, negotiated a 75-year deal that sold rights to lease the city’s parking meters to a private company for $1.2 billion. It soon became evident that the Daley administration, focused on filling a $500 million hole in the municipal budget, had sacrificed billions of dollars in revenues over the life of the contract. After replacing Daley in 2011, new Chicago mayor Rahm Emanuel pursued negotiation, arbitration, and litigation to try to get a better deal from the private company, Chicago Parking Meters, but due to the length of the contract, the damage was largely done. The lesson is obvious: Whenever possible, negotiate relatively short-term contracts so that you can periodically start over from scratch.

2. Prepare for disagreement. Even when the duration of your contract is reasonably short, you can expect misunderstandings and disagreements to crop up periodically during the implementation stage. Prepare to manage conflict effectively by adding a dispute- resolution clause to your contract. By requiring that parties engage in negotiation or mediation for a period of time before filing a lawsuit, you may be able to resolve disputes relatively quickly and inexpensively while also providing opportunities to negotiate better terms. It’s also wise to agree to meet periodically throughout the life of the contract to find out how things are going and make adjustments before conflict escalates.

3. Think twice before you threaten. What’s the best way to convince an unmotivated party to renegotiate? For Trump, threats of noncompliance and punishments have been the obvious solution. Indeed, the threat of noncompliance and tariffs appeared to be effective at motivating South Korea to renegotiate KORUS and agree to meaningful concessions. The threat of tariffs even allowed South Korea to save face with its citizens: It was able to offer concessions to the United States in exchange for the Trump administration backing down from the threat.

Trump’s top economic adviser, Larry Kudlow, has sounded optimistic in the press that the president will achieve similar results with China. Speaking to Reuters, he called the threatened U.S. and Chinese tariffs “mere opening proposals.” “I think we’re going to come to agreement,” Kudlow told Fox News Channel.

But while threats, sanctions, and penalties can indeed be attention-getters, they come with significant risks. As we’ve seen with China, rather than backing down, the other side may retaliate with threats and punishments of its own. The situation can escalate to the point that renegotiation seems virtually impossible.

4. Promote joint problem solving. Rather than making threats, you might instead ask the other party to agree to a sit-down to hear your concerns. Describe how the difficulties you’re facing are affecting the other party, and outline how improvements would help both sides. Above all, try to promote an atmosphere where you can engage in joint problem solving, recommends Salacuse. Take time to listen to each other’s concerns with the current contract and brainstorm solutions that would meet both parties’ interests.

5. Find linkages across deals. You might also compel a partner to renegotiate by looking for connections to other deals. Rather than immediately signing the new trade pact with South Korea, for example, Trump is seeking to make it contingent on China’s progress with North Korea.

Another deal that could give the White House leverage in negotiations with China is the Trans-Pacific Partnership (TPP), a trade agreement the Obama administration entered into with 11 other nations in 2015. Calling the TPP a terrible deal, Trump pulled the United States out of it soon after taking office. On April 12, he proposed reentering it, recognizing that the United States could gain negotiating leverage with China through increased trading with some of its competitors, including Japan and Singapore.

Along these lines, you might persuade counterparts to renegotiate an existing deal by linking it to future business between your organizations or by partnering with their competitors.

International Negotiation