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, and this strategy was less effective in negotiations, reported Columbia’s Malia Mason, Alice J. Lee, Elizabeth A. Wiley, and Daniel Ames.
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.
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.
However, some co-negotiators perceive precise offers as “inflexible,” yet
people who received precise offers made more conciliatory counter-offers, with smaller adjustments and more favorable final settlements.
Precise offers also led to better final deals even when the negotiator opened with a less ambitious precise offer.
Another benefit of precise offers is that they 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.
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,
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, and volunteers said they would follow this strategy in buying a home.
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?
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