The prospect of sharing information with a negotiating counterpart can be scary – it can fix your counterpart into a position at the negotiation table you didn’t intend (an example of the anchoring effect).
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anchoring effect
Anchoring is a cognitive bias that describes the common human tendency to rely too heavily on the first piece of information offered (the "anchor") when making decisions. During decision making, anchoring occurs when individuals use an initial piece of information to make subsequent judgments. Once an anchor is set, other judgments are made by adjusting away from that anchor, and there is a bias toward interpreting other information around the anchor. For example, the initial price offered for a used car sets the standard for the rest of the negotiations, so that prices lower than the initial price seem more reasonable even if they are still higher than what the car is really worth.
The following items are tagged anchoring effect:
Dealmaking and the Anchoring Effect in Negotiations
The following question regarding the anchoring effect was asked of Program on Negotiation faculty member and Harvard Business School and Harvard Law School professor Guhan Subramanian.
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Negotiation Techniques: The First Offer Dilemma in Negotiations
The first offer dilemma in negotiations – should you make the first offer? Few questions related to negotiation techniques and negotiation strategies have yielded more academic attention and debate among practitioners in negotiation research.
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The Anchoring Effect and How it Can Impact Your Negotiation
Goal setting affects performance. In a review of goal-setting research, negotiation scholars Deborah Zetik and Alice Stuhlmacher of DePaul University found that when negotiators set specific, challenging goals, they consistently outperform those who set lower or vague goals.
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Integrative Negotiation: Don’t Forget the Future When Negotiating
A town government and a private fuel-oil company have a standing contract that they have renewed for several years in a row. The contract is again up for renewal, and the town manager is under pressure from his constituents to reduce the city’s heating costs and avoid tax increases.
The city’s fuel-oil consumption has remained … Read More
Price Anchoring 101
Opening offers have a strong effect in price negotiations. The first offer typically serves as an anchor that strongly influences the discussion that follows. In research documenting price anchoring, psychologists Daniel Kahneman and Amos Tversky found that even random numbers can have a dramatic impact on people’s subsequent judgments and decisions.
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Break a Competitive Cycle with Win-Win Negotiation Strategies
Negotiators seeking to break through the mythical fixed-pie mindset can try the following three proven strategies, suggested by Max Bazerman for finding mutually beneficial tradeoffs.
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An Example of the Anchoring Effect
People tend to irrationally fixate on the first number put forth in a negotiation—the anchor—no matter how arbitrary it may be. Even when we know the anchor has limited relevance, we fail to sufficiently adjust our judgments away from it. This is the anchoring effect.
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How to Create Value at the Negotiation Table: Strategies for Creating Win-Win Negotiations
While you might choose many processes for conducting your negotiations, we recommend the following three steps of a mutual-gains approach to negotiations:
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The Advantages of Bias at the Negotiation Table
What impact do cognitive biases have on bargaining scenarios? Work by negotiation researchers Russell B. Korobkin of UCLA and Chris P. Guthrie of Vanderbilt University suggests how to turn knowledge of four specific biases into tools of persuasion.
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Top 10 Negotiation Skills You Must Learn to Succeed
Increasingly, business negotiators recognize that the most effective bargainers are skilled at both creating value and claiming value—that is, they both collaborate and compete. The following 10 negotiation skills will help you succeed at integrative negotiation.
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Effective Negotiation Techniques: Strive for a Precision Advantage
As you may have noticed, the first offer made in a negotiation often has a significant influence on the final outcome. In their research, psychologists Daniel Kahneman and Amos Tversky documented that the first number introduced in a negotiation serves as an “anchor” that can be impossible to ignore—no matter how irrelevant, outrageous, or insulting … Read More
Business Negotiation Solutions: Coping with Low Power
In business negotiations, a little power is better than none at all, right? After all, if talks with a prospective client fail, we’d rather have a few unpromising leads to turn to rather than none.
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Make the Most of Your Salary Negotiations
What salary negotiation skills can you use if a potential employer asks you about your past salary? If you earned a competitive wage, your concern may be whether the new employer can afford you.
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Anchoring for Maximum Effect
It’s said that you never get a second chance to make a great first impression, and that certainly can be the case in negotiation. A weak handshake or a gruff demeanor can color how we see someone for a very long time. Similarly, make an unambitious or poorly worded first offer, and you’re much less … Read More
The Anchoring Bias Can Get Talks off to a Strong Start
Should you make the first offer in a negotiation? Typically yes, abundant research on the anchoring bias suggests. What is anchoring in negotiation? In negotiations centered on price or another figure, the party who moves first typically benefits by “anchoring” the discussion that follows on her offer—even if the anchor is arbitrary. For example, the … Read More
Compensation Negotiation Tips for Salary Bargaining
Job candidates are often eager for compensation negotiation tips, and with good reason: they tend to be at a bargaining disadvantage relative to the hiring organization. Due to the well-documented anchoring effect, the first figure introduced into the discussion can strongly influence the final outcome—and the wage or wage range cited by employers is likely … Read More
Should salary negotiations be a laughing matter?
In salary negotiations, job candidates are often at a disadvantage relative to the hiring organization. Due to the well-documented anchoring effect, the first figure introduced into the discussion tends to strongly influence the final outcome. Unfortunately for candidates, the first figure mentioned in a negotiation often is not in their favor.
For example, when opening salary … Read More
When First Offers Fail
In negotiation, the party who makes the first offer often gets the lion’s share of the value. That can be due to the anchoring effect, or the tendency for the first offer to “anchor” the bargaining that follows in its direction, even if the offer recipient thinks the offer is out of line.
Yet plenty of … Read More
Satisficing and Negotiation
It stands to reason that devoting less time to relatively unimportant choices should free you up for more meaningful pursuits and increase your overall satisfaction. But how does the concept of satisficing apply to your most important decisions and negotiations?
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Negotiation Research You Can Use: For an Effective First Offer, Strive for Precision
The party that makes the first offer in a negotiation generally gets the best deal, multiple negotiation studies suggest. The first offer presented serves as an anchor that draws subsequent offers in its direction.
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When Forming First Offers, Take Precision into Account
What should your first offer be in a negotiation?
The question doubtless has led to sleepless nights for negotiators who understand that the first offer in a negotiation tends to have a strong anchoring effect on the haggling that may follow. Because even extreme offers can pull the discussion in their direction, the question of how … Read More
Negotiation Advice: When to Make the First Offer in Negotiation
When or when not to make the first offer in negotiations is a question many expert negotiators ask themselves when approaching business negotiations, real estate transactions, or even interpersonal negotiations with friends and family. In this article drawn from negotiation research, we offer negotiating skills and negotiation tips for when, and when not, to make … Read More
What’s Keeping You from Closing the Deal?
When talks stall, it’s tempting to jump to conclusions: “It’s purely a price gap.” “They’re being unreasonable.” “We’re not communicating well.” “We’re in a weak position.”
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Dear Negotiation Coach: Starting Off on the Right Foot
QUESTION
I’m trying to decide whether to make the first offer in a price negotiation. I’ve heard arguments in favor of both points of view—that is, going first versus sitting back and waiting for the other side to go first. Which tends to be the more effective strategy?
ANSWER
Negotiation is often a balancing act between learning about … Read More
In Negotiation, How Much Does Personality Matter?
We tend to have strong intuitions about which personality traits help or hurt us in negotiation, but does research on the topic confirm our hunches?
Before we explore this topic, please answer “True” or “False” in response to the following questions:
1. Extroverted negotiators tend to perform better than introverted negotiators.
2. Agreeable negotiators generally are more successful … Read More
Tough Negotiation Tips from Jennifer Aniston?
Fans of the television show Friends got a treat last month when Netflix made all 236 episodes of the blockbuster hit available to stream online. At first glance actors Lisa Kudrow, Jennifer Aniston and the rest of the star-studded cast might not be your first pick to peg as formidable negotiators, but at the height … Read More
When a little power is a dangerous thing
In 1975, Leigh Steinberg launched his career as a sports agent with what appeared to be a tough negotiation. The Atlanta Falcons had chosen Steinberg’s client, rookie quarterback Steve Bartkowski, as their first pick in the first round of the National Football League (NFL) draft. The Falcons had other choices they could turn to if … Read More
In negotiation, it’s all in the timing
On July 11, 2000, U.S. president Bill Clinton welcomed Israeli Prime Minister Ehud Barak and Palestinian Authority Chairman Yasser Arafat to a summit at Camp David aimed at resolving the Israeli-Palestinian conflict once and for all. The summit covered various contentious issues, including territory, settlements, security, and the status of refugees.
After about two weeks, on … Read More
The Enduring Power of Anchors
In past issues of Negotiation, we’ve reviewed the anchoring effect – the tendency for negotiators to be overly influenced by the other side’s opening bid, however arbitrary. When your opponent makes an inappropriate bid on your house, you’re nonetheless likely to begin searching for data that confirms the anchor’s viability. This testing is likely to … Read More
Anchors Away?
Adapted from “The Enduring Power of Anchors,” first published in the Negotiation newsletter, October 2006.
In the Negotiation newsletter, we have reviewed the anchoring effect—the tendency for negotiators to be overly influenced by the other side’s opening bid, however arbitrary. When your opponent makes an inappropriate bid on your house, you’re nonetheless likely to begin searching … Read More
Making the first move
Adapted from “Should You Make the First Offer?” by Adam D. Galinsky (Professor, Northwestern University). First published in Negotiation Newsletter.
Whether negotiators are bidding on a firm, seeking agreement on a compensation package, or bargaining over a used car, someone has to make the first offer. Should it be you, or should you wait to … Read More
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Articles & Insights
BATNA
- Business Negotiations
- Conflict Resolution
- How to Deal with Threats: 4 Negotiation Tips for Managing Conflict at the Bargaining Table
- Tough Topics in Negotiation: Negotiating a Non-Compete Agreement with Employers
- What is an Arbitration Agreement?
- Using Conflict Resolution Skills: Trying to Forgive and Move Forward
- Dealing with Difficult People? Negotiation Lessons from Ronald Reagan
- Crisis Negotiations
- Harvard Law Professor Guhan Subramanian Moderates Panel on Difficult Negotiation Scenarios
- Police Negotiation Techniques from the NYPD Crisis Negotiations Team
- Crisis Negotiation Skills: The Hostage Negotiator’s Drill
- Hostage Negotiation Techniques for Business Negotiators
- What is Crisis Management in Negotiation?
- Dealing with Difficult People
- Dealmaking
- Dealmaking and the Anchoring Effect in Negotiations
- Six Strategies for Creating Value at the Negotiation Table
- The Art of Negotiation: Anger Management at the Bargaining Table
- Negotiation Techniques: The First Offer Dilemma in Negotiations
- Understanding Exclusive Negotiation Periods in Business Negotiations
- Dispute Resolution
- International Negotiation
- Dispute Resolution for India and Bangladesh
- Cross Cultural Negotiations in International Business: Four Negotiation Tips for Bargaining in China
- Famous Negotiators: Tony Blair’s 10 Principles to Guide Diplomats in International Conflict Resolution
- How to Overcome Cultural Barriers in Communication – Cultural Approximations of Time and the Impact on Negotiations
- Best Negotiators in History: Nelson Mandela and His Negotiation Style
- Leadership Skills
- Mediation
- Alternative Dispute Resolution (ADR): Negotiating for the Right Mediator
- When Lose-Lose is the Best Alternative to a Negotiated Agreement (BATNA)
- What Makes a Good Mediator?
- Mediation Training: What Can You Expect?
- Mediation Techniques – Resolve Disputes and Manage Conflict with These Mediation Skills
- Negotiation Skills
- Negotiation Training
- 10 Negotiation Training Skills Every Organization Needs
- 3-D Negotiation Strategy
- Best Negotiation Books: A Negotiation Reading List
- Use a Negotiation Preparation Worksheet for Continuous Improvement
- Ethics and Negotiation: 5 Principles of Negotiation to Boost Your Bargaining Skills in Business Situations
- Salary Negotiations
- Teaching Negotiation
- Win-Win Negotiations