UNDERSTAND ANCHORING WHEN NEGOTIATING

August 6, 2012

Some individuals commence bargaining encounters with modest proposals hoping to generate reciprocal behavior by their opponents that will generate pleasant and cooperative win-win interactions. Opening offers that are overly generous to adversaries are likely to have the opposite effect due to the impact of anchoring. When people receive more generous offers than they anticipated, they question their own preliminary assessments and increase their own aspirations. They begin to think that they will be able to obtain more beneficial results than they initially thought possible, and they move psychologically away from the other side. They thus make opening offers that are more favorable to their own side. It is thus important for parties commencing bargaining encounters to plan opening offers that favor their own side, but which can be logically explained to provide them with credibility.

In my Legal Negotiating class, I give my students identical fact patterns pertaining to a tort claim. I indicate that the students all represent the defendant and ask them two questions. What is the first offer you plan to make in response to the plaintiff’s initial demand? How much do you think you will finally have to pay to resolve this claim? Half of the students are told the plaintiff has demanded $100,000, and half are told the plaintiff has demanded $50,000. The half facing the initial $100,000 demand plan higher opening offers and think they will have to pay more to resolve the claim than the students facing the $50,000 demand.