Many people hesitate to present a negotiation offer as a range of values, assuming that co-negotiators will anchor on the lower value in the range as a “reservation price.”
This is based on the power of first offers as negotiation anchors, demonstrated in research by University of Chicago’s Nicholas Epley and Thomas Gilovich of Cornell.
Contrary to this expectation, range offers actually led to stronger outcomes in controlled studies by Columbia University’s Daniel R. Ames and Malia F. Mason. These researchers suggested that range offers provide “dual anchors” that signal a negotiator’s knowledge of value as well as politeness.
In addition, negotiator credibility, interpersonal style, and value awareness increase an anchor potency’s to influence settlement outcomes.
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, 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.
This approach is recommended based on this research.
- 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 offers, 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.
In fact, 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.
Previously, Mason and team showed the benefit of precise single number offers, and the current research shows the value of range offers.
Mason and team argued 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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