Many people hesitate to present a negotiation offer as a range due to concerns that only the lower value in the range would be heard due to selective attention by the co-negotiator.
In addition, many negotiators are concerned that the lower end of a range offer signals the “reservation price” or “bottom line.”
In fact, range offers may lead to stronger outcomes, according to Columbia University’s Daniel R. Ames and Malia F. Mason, who compared range offers with point offers in laboratory studies of negotiations.
First offers can be powerful anchors, despite their risk of bias and marginal accuracy, reported University of Chicago’s Nicholas Epley and Thomas Gilovich of Cornell.
Even more influential are “dual anchors,” which signal both a negotiator’s knowledge of value as well as politeness.
Ames and Mason suggested that negotiator credibility and knowledge of value increases anchor potency coupled with interpersonal relationship “capital” determine settlement outcomes.
These findings suggest that range and point opening offers can have varying impacts, depending on perceived preparation, credibility, politeness, and reasonableness of the proposer.
Ames and Mason tested three types of negotiation proposal ranges:
- Bolstering range includes the target point value as the bottom of the range and an aspirational value as the top of the range, usually yields generous counteroffers and higher settlement prices.
- Backdown range features the target point value as the upper end of the range and a concession value as the lower offer.
This approach often leads to accepting the lower value and is generally not recommended.
- Bracketing range spans the target point offer and tends to have neutral settlement outcomes for the offer-maker.
Compared with point offer-makers, bracketing range offers provided some relational benefits because they were seen as less aggressive and stubborn.
Extreme anchors can be seen as aggressive and offensive, and may lead to negotiation breakdown, according to INSEAD’s Martin Schweinsberg with Gillian Ku of London Business School, collaborating with Cynthia S. Wang of University of Michigan, and National University of Singapore’s Madan M. Pillutla.
Somewhat surprisingly, the found that negotiators with little power were more likely to walk away from extreme anchors, though high-power negotiators were equally offended.
Previously, Mason and team showed the benefit of precise single number offers, and the current research shows the value of less precise range offers.
Mason and team argue that point offers and range offers are independent and interactive informational processes with influence on settlement values: “…bolstering-range offers shape the perceived location of the offer-maker’s reservation price, (and) precise first offers shape the perceived credibility of the offer-maker’s price proposal.
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Blog – Kathryn Welds | Curated Research and Commentary
LinkedIn Open Group Psychology in Human Resources (Organisational Psychology)