Many people hesitate to present a negotiation offer as a range of values because they are concerned that co-negotiators will anchor on the lower value in the range as a “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.
They 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” in range offers because they signal a negotiator’s knowledge of value as well as politeness.
Ames and Mason suggested that negotiator credibility and knowledge of value increase anchor potency.
Coupled with interpersonal relationship “capital”, these factors determine settlement outcomes.
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, which 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 a recommended approach.
- Backdown range, which 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, which 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.
Extreme anchors can be seen as 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, they found that negotiators with little power were more likely to walk away from extreme anchors.
Also surprisingly, 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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