The First Offer Anchoring Advantage

Common wisdom for negotiations says it’s better to wait for your opponent to make the first offer. This article from HBS Working Knowledge, that is well worth reading in its entirety, suggests that in fact, you may win by making the first offer yourself, stating:

"Because of the inherent ambiguity of most negotiations, some experts suggest that you should wait for the other side to speak first. By receiving the opening offer, the argument goes, you'll gain valuable information about your opponent's bargaining position and clues about acceptable agreements. This advice makes intuitive sense, but it fails to account for the powerful effect that first offers have on the way people think about the negotiation process...

In situations of great ambiguity and uncertainty, first offers have a strong anchoring effect—they exert a strong pull throughout the rest of the negotiation... But why?

The answer lies in the fact that every item under negotiation (whether it's a company or a car) has both positive and negative qualities—qualities that suggest a higher price and qualities that suggest a lower price.

High anchors selectively direct our attention toward an item's positive attributes; low anchors direct our attention to its flaws. Hence, a high list price directed real estate agents' attention to the house's positive features (such as spacious rooms or a new roof) while pushing negative features (such as a small yard or an old furnace) to the back recesses of their minds. Similarly, a low anchor led mechanics to focus on a car's worn belts and ailing clutch rather than its low mileage and pristine interior..."