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anchoring

What is Anchoring in Negotiation?

Should you make the first offer in a negotiation? Typically yes, abundant research on the anchoring bias suggests.

In many negotiations, the party who moves first typically benefits by “anchoring” the discussion that follows on an offer—even if the anchor is arbitrary.

The anchoring bias, or anchoring effect, is considered a “bias” because it distorts our judgment, especially when the bargaining zone is unclear. This knowledge of the anchoring bias in negotiation can help us make and respond to first offers more effectively.

In their groundbreaking research from the 1970s, psychologists Daniel Kahneman and Amos Tversky showed that when we’re asked to make a judgment in the face of uncertainty, we are easily swayed by the first figure that’s introduced into the conversation, however irrelevant, outrageous, or insulting it may seem. The first number serves as an “anchor” that’s almost impossible to forget.

There is one situation in which making the first offer is not to your advantage: when the other side has much more information than you do about the item to be negotiated or about the relevant market or industry.

This doesn’t mean you should sit back and let the other side make the first offer. Rather, this is your opportunity to level the playing field by gathering more information. The well-prepared negotiator will feel confident about making the first offer and anchoring the negotiation in their favor.

And if the other side does make the first offer? Base your counteroffer on the same information you would use to construct a first offer, namely your ideal outcome and your knowledge of the other party’s alternatives and likely reservation price.

To learn more about anchoring, and how to negotiate successfully, you can download a complimentary copy of our special report, Negotiation Skills: Negotiation Strategies and Negotiation Techniques to Help You Become a Better Negotiator, right now!

The following items are tagged anchoring:

Teaching the Fundamentals: The Best Introductory Negotiation Role Play Simulations

Posted by & filed under Teaching Negotiation.

Introductory negotiation courses are taught in law and business schools around the world, but are also increasingly taught to undergraduates and in all types of corporate settings. No matter the context, though, the basic elements of negotiation are roughly similar. Teaching interest-based negotiation, the Zone of Possible Agreement (ZOPA), the Best Alternative to a Negotiated … Read More

Power in Negotiation: The Impact on Negotiators and the Negotiation Process

Posted by & filed under Negotiation Skills.

According to Dacher Keltner of the University of California at Berkeley and his colleagues, power in negotiation affects two primary neurological regulators of behavior: the behavioral approach system and the behavioral inhibition system. Powerful negotiators demonstrate “approach related” behaviors such as expressing positive moods and searching for rewards in their environment. … Read More

What is Anchoring in Negotiation?

Posted by & filed under Negotiation Skills.

What exactly is anchoring in negotiation, and how does it play out at the bargaining table? Consider this anchoring bias example from Harvard Business School and Harvard Law School faculty member Guhan Subramanian. While running a negotiation simulation in one of his classes, Subramanian noticed that one student spent a considerable amount of time explaining … Read What is Anchoring in Negotiation?

How to Negotiate a Higher Salary after a Job Offer

Posted by & filed under Salary Negotiations.

If you’re wondering how to negotiate a higher salary after a job offer, congratulations: You’re aiming higher than many job candidates ever do. It’s common for prospective employees to accept whatever offer the would-be employer puts forth without negotiating for more. Unless the employer explicitly stipulates that their offers are nonnegotiable, that’s typically a mistake. … Read More

Negotiation Advice: When to Make the First Offer in Negotiation

Posted by & filed under Negotiation Skills.

When or when not to make the first offer in negotiations is a question many expert negotiators ask themselves when approaching business negotiations, real estate transactions, or even interpersonal negotiations with friends and family. In this article drawn from negotiation research, we offer negotiating skills and negotiation tips for when, and when not, to make … Read More

Michael Scott, Negotiation Genius? Lessons from TV Negotiations

Posted by & filed under BATNA.

Business negotiators can get useful advice from a variety of sources, from books to blogs to training and classes—and even, as it turns out, from TV shows. As you may have noticed, negotiations frequently play out on TV: from hostage negotiators on police procedurals to fast-talking lawyers in corporate boardrooms to the real-life entrepreneurs and … Read More

Price Anchoring 101

Posted by & filed under Negotiation Skills.

Opening offers have a strong effect in price negotiations. The first offer typically serves as an anchor that strongly influences the discussion that follows. In research documenting price anchoring, psychologists Daniel Kahneman and Amos Tversky found that even random numbers can have a dramatic impact on people’s subsequent judgments and decisions. … Read Price Anchoring 101

Power and Negotiation: Advice on First Offers

Posted by & filed under BATNA.

Should you make the first offer in negotiation? It’s a perennial question, one that has attracted considerable debate. In a 2023 study published in the Negotiation Journal, researchers Yossi Maaravi, Ben Heller, and Aharon Levy find that negotiators’ relative power affects their first offers. Here, we take a closer look at issues related to power … Read Power and Negotiation: Advice on First Offers

5 Good Negotiation Techniques

Posted by & filed under Negotiation Skills.

You’ve mastered the basics of good negotiation techniques: you prepare thoroughly, take time to build rapport, make the first offer when you have a strong sense of the bargaining range, and search for wise tradeoffs across issues to create value. Now, it’s time to absorb five lesser-known but similarly effective negotiation topics and techniques that … Read 5 Good Negotiation Techniques

Should Salary Expectations Be a Laughing Matter?

Posted by & filed under Business Negotiations.

In salary negotiations, job candidates are often at a disadvantage relative to the hiring organization. Due to the well-documented anchoring effect, the first figure introduced into the discussion tends to strongly influence the salary expectations. Unfortunately for candidates, the first figure mentioned in a negotiation often is not in their favor. … Read Should Salary Expectations Be a Laughing Matter?

How Timing Can Influence the Anchoring Effect

Posted by & filed under Dealmaking.

Back on July 11, 2000, we were offered an excellent case study on the anchoring effect when U.S. president Bill Clinton welcomed Israeli Prime Minister Ehud Barak and Palestinian Authority Chairman Yasser Arafat to a summit at Camp David aimed at resolving the Israeli-Palestinian conflict once and for all. The summit covered various contentious issues, … Read How Timing Can Influence the Anchoring Effect

Negotiation Research Says to Make Stronger First Offers in Multi-Issue Negotiations

Posted by & filed under Negotiation Skills.

Should you make the first offer in a negotiation? What about multi-issue negotiations? It’s not a trivial question. The negotiator who makes the first offer can powerfully anchor the discussion in her favor, research has found. In fact, the first offer accounts for between 50% and 85% of the variance in a negotiation’s final outcome, Adam … Read More

Parker-Gibson All-In-One Curriculum Package is Now Available!

Posted by & filed under Teaching Negotiation.

New to Teaching Negotiation?  If you are new to teaching negotiation or are looking to go in-depth on the fundamental negotiation concepts, the Parker-Gibson All-In-One Curriculum Package will provide you with everything you need to teach negotiation. Parker-Gibson, one of the Teaching Negotiation Resource Center’s most popular simulations, is a two-party, single-issue, distributive negotiation between two neighbors regarding the potential sale … Read More

Negotiation research you can use: When offers are more appealing than requests

Posted by & filed under Negotiation Skills.

In 2015, the government of Greece approached the European Union regarding a new bailout package by requesting a six-month loan extension. The request was rejected within five hours. Four months later, Greece offered new budget proposals in return for an extended bailout package. This time, the proposal led to agreement. The anecdote begs the question, Do … Read More

Check Out Our Advanced Search Tool! Find New Teaching Materials in Seconds

Posted by & filed under Teaching Negotiation.

The Advanced Materials Search feature allows you to search for teaching materials based on nine different categories, including time required, number of parties, and the negotiation concepts you want to teach. The Teaching Negotiation Resource Center (TNRC) is pleased to announce the launch of our new Advanced Materials Search, which allows you to quickly find the … Read More

How to Bargain Salary: Laughing Matters?

Posted by & filed under Salary Negotiations.

As they contemplate how to bargain salary, job candidates are often at a disadvantage relative to the hiring organization. Due to the well-documented anchoring effect, the first figure introduced into a negotiation tends to strongly influence the final outcome. Unfortunately for candidates, the wage or wage range that employers give in a job listing or … Read How to Bargain Salary: Laughing Matters?

Effective Negotiation Techniques: Strive for a Precision Advantage

Posted by & filed under Negotiation Skills.

As you may have noticed, the first offer made in a negotiation often has a significant influence on the final outcome. In their research, psychologists Daniel Kahneman and Amos Tversky documented that the first number introduced in a negotiation serves as an “anchor” that can be impossible to ignore—no matter how irrelevant, outrageous, or insulting … Read More

The Anchoring Bias Can Get Talks off to a Strong Start

Posted by & filed under Negotiation Skills.

Should you make the first offer in a negotiation? Typically yes, abundant research on the anchoring bias suggests. What is anchoring in negotiation? In negotiations centered on price or another figure, the party who moves first typically benefits by “anchoring” the discussion that follows on her offer—even if the anchor is arbitrary. For example, the … Read More

Compensation Negotiation Tips for Salary Bargaining

Posted by & filed under Salary Negotiations.

Job candidates are often eager for compensation negotiation tips, and with good reason: they tend to be at a bargaining disadvantage relative to the hiring organization. Due to the well-documented anchoring effect, the first figure introduced into the discussion can strongly influence the final outcome—and the wage or wage range cited by employers is likely … Read More

Deal Design Guidelines: Set Yourself Up for a Better Deal

Posted by & filed under Dealmaking.

Without realizing it, we leave many of our most important decisions in negotiation up to chance. When talking to a potential negotiating partner, we may assume that we have met the best person possible to do this particular deal. We make tacit assumptions about whether we’ll negotiate in person, what we’ll discuss, how long the … Read More

What is the Anchoring Bias?

Posted by & filed under Negotiation Skills.

It may be the most burning question in business negotiation: Should you make the first offer? Traditionally, negotiators were advised to wait for the other side to make a first offer. According to this reasoning, the other side’s offer gives you valuable information about his goals and alternatives. More recently, however, research on the anchoring bias has … Read What is the Anchoring Bias?

Leadership Style Assessment: Road Map for Podemos in Spain

Posted by & filed under Leadership Skills.

The skills required for honing an effective participative leadership style have a great deal in common with those used by good negotiators. Following the May 24, 2015 municipal elections in Spain, all of those skills are being put to the test. The elections delivered a stunning rebuke to the incumbent conservative Popular Party of Mariano … Read More

When Forming First Offers, Take Precision into Account

Posted by & filed under Dealmaking.

What should your first offer be in a negotiation? The question doubtless has led to sleepless nights for negotiators who understand that the first offer in a negotiation tends to have a strong anchoring effect on the haggling that may follow. Because even extreme offers can pull the discussion in their direction, the question of how … Read More

A Negotiation Back on the Rails with Transactional Leadership

Posted by & filed under Leadership Skills.

Crumbling transportation infrastructure has become a serious issue across the country. Nowhere is this problem more acute than the nation’s capitol, where the forty year-old Metro has been plagued by ineffective, bureaucratic leadership, and is now on the verge of collapse. New Metro Chairman Jack Evans aims to tackle those problems head-on, but he drew … Read More

How Mental Shortcuts Lead to Misjudging

Posted by & filed under Negotiation Skills.

Judges don’t make decisions based on a thorough accounting of all the relevant and available information. Instead, like all of us, they rely on heuristics – simple mental shortcuts – to make decisions. As many past articles have noted, heuristics often lead to good decisions, but they can also create cognitive blinders that produce systematic … Read How Mental Shortcuts Lead to Misjudging

Anchor Trials or Balloons in Conflict Resolution

Posted by & filed under Conflict Resolution.

The power of anchors in negotiation has been demonstrated time and again. Sellers who demand more tend to get more. Indeed, the initial asking price is usually the best predictor of the final agreement. A trio of researchers may have found an important exception to this rule, however; lower starting numbers set by the seller in … Read Anchor Trials or Balloons in Conflict Resolution

The Enduring Power of Anchors

Posted by & filed under Negotiation Skills.

In past issues of Negotiation, we’ve reviewed the anchoring effect – the tendency for negotiators to be overly influenced by the other side’s opening bid, however arbitrary. When your opponent makes an inappropriate bid on your house, you’re nonetheless likely to begin searching for data that confirms the anchor’s viability. This testing is likely to … Read The Enduring Power of Anchors

Avoid judicial bias with negotiation

Posted by & filed under Conflict Resolution, Daily.

Adapted from “Blind Justice? Think Twice Before Going to Court,” by Chris Guthrie (professor, Vanderbilt University Law School), first published in the Negotiation newsletter, April 2007. Planning to resolve a personal or business dispute in court? Consider that judges don’t make decisions based on a thorough accounting of all the relevant and available information.  Instead, like … Read Avoid judicial bias with negotiation

Anchors Away?

Posted by & filed under Negotiation Skills.

Adapted from “The Enduring Power of Anchors,” first published in the Negotiation newsletter, October 2006. In the Negotiation newsletter, we have reviewed the anchoring effect—the tendency for negotiators to be overly influenced by the other side’s opening bid, however arbitrary. When your opponent makes an inappropriate bid on your house, you’re nonetheless likely to begin searching … Read Anchors Away?

The Ambidextrous Negotiator

Posted by & filed under Negotiation Skills.

Adapted from “Evenhanded Decision Making,” first published in the Negotiation newsletter, May 2006. As discussed in past issues of the Negotiation newsletter, anchoring and framing can bias important decisions in negotiation. A buyer may make a more generous offer than she intended, for example, after a seller drops anchor on a bold demand. A litigant who … Read The Ambidextrous Negotiator

Advertising at a charity walk

Posted by & filed under Business Negotiations, Daily.

The PON Clearinghouse offers hundreds of role simulations, from two-party, single-issue negotiations to complex multi-party exercises. Ocean Splash is a two-party, two-issue scoreable negotiation between a charity and a corporate sponsor regarding the number and placement of advertising banners at a fundraising walk. SCENARIO: The U.S. Cancer Association (USCA) chapter in Sixton City is organizing its … Read Advertising at a charity walk

Budget turmoil inside a hospital

Posted by & filed under Daily, Negotiation Skills.

The PON Clearinghouse offers hundreds of role simulations, from two-party, single-issue negotiations to complex multi-party exercises. Negotiating Budget Cuts at Newtowne Hospital is a six-person negotiation among hospital administration and employee representatives to reach consensus on budget cuts in three departments. SCENARIO: Dr. Van Hagen, a distinguished heart surgeon, will soon join the staff at Newtowne Hospital, … Read Budget turmoil inside a hospital

Dropping anchors

Posted by & filed under Business Negotiations, Daily.

Adapted from “Anchors or Trial Balloons?”, first published in the Negotiation newsletter. The power of anchors in negotiation has been demonstrated time and again. Sellers who demand more tend to get more. Indeed, the initial asking price is usually the best predictor of the final agreement. A trio of researchers may have found an important exception … Read Dropping anchors

Making the first move

Posted by & filed under Daily, Negotiation Skills.

Adapted from “Should You Make the First Offer?” by Adam D. Galinsky (Professor, Northwestern University). First published in Negotiation Newsletter. Whether negotiators are bidding on a firm, seeking agreement on a compensation package, or bargaining over a used car, someone has to make the first offer. Should it be you, or should you wait to … Read Making the first move