Anchoring, first offers and the power of silence

The first number mentioned in a negotiation tends to pull everything towards it. Knowing when to name a number, how to answer an extreme one and when simply to pause can change the result more than clever arguments.

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What an anchor is

• PON explains that the first offer 'anchors' the conversation and shapes the offers that follow, even when the anchor is arbitrary. It is called a bias because it distorts judgement, especially when the bargaining range is unclear.
• Example from PON: a home's listed price strongly anchors how buyers view the property and what they counter-offer.
• PON's job example: a candidate hoping for $75,000 was offered $45,000 and countered at $55,000, well below the $80,000 they would have asked for if they had spoken first.
• Another PON example: an interviewer thought $120 an hour was right but asked the candidate to name a price. The candidate said $60, and they settled at $50.
• Lesson: if you have done your research, your own number deserves to be heard.

Should you go first? What the latest research says

• PON reports a meta-analysis by a team of 15 researchers led from Leuphana University of Lüneburg in Germany (lead author Hannes M. Petrowsky), which combined 90 earlier studies on first offers.
• Making the first offer, especially an ambitious one, had substantial positive effects on the deal value for the person making it.
• But ambitious first offers also increased the odds of no deal at all, and counterparts were less satisfied with the final agreement.
• These effects were stronger in simple, one-off deals with one or a few issues.
• PON cites Max Bazerman of Harvard Business School, who argues that the benefits of an aggressive opening offer can be outweighed by the risk of impasse.

A simple rule for going first

• If you know more about the possible range of deals than the other side, PON says you can make the first offer more confidently.
• If they know more, waiting is usually wiser. PON's example: job candidates often do well to wait for the recruiter's offer, because recruiters know the pay range better.
• For simple, one-time deals, the researchers PON reports advise moving first and ambitiously. For complex deals, or where the relationship matters most, they suggest waiting for the other side to move first may be worth considering.
• If neither side knows much, PON notes a first offer can work but you risk being too generous or too demanding, so research first.
• Always give a reason with your number: 'Based on three similar listings, I'm asking 950 dirhams.'

Handling an extreme anchor

• PON reports US experiments by Todd Thorsteinson of the University of Idaho. In the first, with 206 college students, a job candidate who said she would like an implausibly high $100,000 was offered about $5,000 more than one who asked for $1.
• PON quotes Bazerman: 'Any anchor that creeps into the discussion is likely to have an inappropriate effect', even if you dismiss it as ridiculous.
• Defence: base your counter-offer on your own research, ideal outcome and estimate of their alternatives, not on their number (PON).
• Knowing your BATNA makes it easier to treat an extreme anchor as noise rather than a starting point.
• PON's article on silence suggests answering an aggressive anchor with a pause rather than an immediate protest, so the conversation does not keep circling that number.
• Script: 'That's well outside what I've seen. Recent listings for this model are around 900 dirhams, so I could offer 850.'

The power of a pause

• MIT Sloan reports research by Jared Curhan and colleagues in the Journal of Applied Psychology, which used laboratory simulations of a candidate and a recruiter negotiating a pay package. The first study measured natural silences of at least three seconds.
• In the first study, breakthroughs were more likely right after a silent pause than at any other point.
• When people paused deliberately, they took a more thoughtful mindset and were more likely to spot gains for both sides, and the pause did not harm the other person's experience.
• The exception: when a status gap was highlighted and a lower-status candidate used silence with a higher-status recruiter, there was no benefit and the candidate felt worse. Use pauses gently with people in authority.
• PON's practical tips: count to three before replying, keep a neutral expression, ask a question and then wait. Curhan suggested, though the study did not test it, that asking for a moment to think may feel less awkward than silence alone.
• PON notes that in many Western cultures silence feels uncomfortable. How a pause is read can differ between people and settings, so read the situation.