Tag Archives: Gillian Ku

Range Offers vs Point Offers for Advantageous Negotiation Settlements

Daniel Ames

Daniel Ames

Many people avoid making negotiation offers as a range of values, because they are concerned that co-negotiators will “anchor” on the range’s lower value. 

The power of first offers as negotiation anchors was demonstrated in research by University of Chicago’s Nicholas Epley and Thomas Gilovich of Cornell.

Malia F Mason

Malia F Mason

However, range offers actually led to stronger outcomes in controlled studies by Columbia University’s Daniel R. Ames and Malia F. Mason.
This team suggested that range offers provide “dual anchors” that signal a negotiator’s knowledge of value and politeness.

Nicholas Epley

Nicholas Eple

Negotiators’ credibility, interpersonal style, and value awareness are also associated with the anchor value’s influence settlement outcomes.

Thomas Gilovich

Thomas Gilovich

Range and point opening offers have varying impacts, depending on the proposer’s perceived preparation, credibility, politeness, and reasonableness.

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.
    This strategy usually yields generous counteroffers and higher settlement prices, and is recommended based on their research.

  • 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 not recommended.

  • Bracketing range spans the target point offer and often has neutral settlement outcomes for the offer-maker.
    This tactic provides some relational benefits because they were seen as less aggressive.
Martin Schweinsberg

Martin Schweinsberg

Extreme anchors can be seen as aggressive 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.
Even negotiators with little power in their studies were more likely to walk away from extreme anchors.
Likewise, high-power negotiators said they were offended by extreme anchors.

Gilliam Ku

Gilliam Ku

Previously, Mason and team showed the benefit of precise single number offers, and these findings suggest the value of range offers.

The research group concluded that point offers and range offers are independent and interactive processes that influence 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.

  • When do you prefer to present a precise negotiation offers instead of a negotiation range?

RELATED POSTS:

©Kathryn Welds

Precise Negotiation Offers Yield Better Bargaining Results

Malia F Mason

Malia F Mason

Opening negotiation offers usually anchor the discussion and shape settlement values.
Many people make opening offers in “round” numbers like $10 instead of “precise” numbers like $9.
This strategy rendered less effective results in negotiation experiments, reported Columbia’s Malia Mason, Alice J. Lee, Elizabeth A. Wiley, and Daniel Ames.

Y Charles Zhang

Y Charles Zhang

Negotiators can improve negotiation outcomes by specifying offers in precise values because they more potently anchored the negotiation range.
In addition, negotiators who proposed precise offers were perceived as more confident, credible, and “well-informed” regarding actual value.

Norbert Schwartz

Norbert Schwartz

Consumers reported less confidence in precise estimates when they doubt the communicator, found University of Michigan’s Y. Charles Zhang and Norbert Schwarz of University of Southern California.

Some recipients of precise offers view these proposals by their negotiation partners as “inflexible.
However, recipients of precise offers made more conciliatory counter-offers with smaller adjustments and more favorable final settlements.
Precise offers were associated with more favorable final deals even when the negotiator opened with a less ambitious precise offer.

Martin Schweinsberg

Martin Schweinsberg

Precise offers are less likely to be seen as aggressive by a co-negotiator, according to INSEAD’s Martin Schweinsberg collaborating with Gillian Ku and Madan M. Pillutla of London Business School’s and Cynthia S. Wang of Oklahoma State University.
Ambitious first offers may stall progress toward settlement if a negotiation partner takes offense.

Gillian Ku

Gillian Ku

This risk of stalemated negotiation increases if negotiators see themselves in a lower-power position and receive an extreme offer.
These negotiators may be more willing to end negotiations,

Manoj Thomas

Manoj Thomas

Precise offers can obscure their actual value, noted Cornell’s Manoj Thomas and Vrinda Kadiyali with Daniel H. Simon of Indiana University.
Buyers underestimated the size of precise prices, particularly under uncertain conditions:  U.S. homebuyers paid more when list prices were precise.

Vrinda Kadiyali

Vrinda Kadiyali

Precise offers provide some of the benefits of favorably anchoring negotiation discussions while reducing risks of “offensive” extreme offers.

-*How effective have you found “precise” opening offers in achieving your negotiation goals?

RELATED POSTS:

©Kathryn Welds