Excerpt from Chapter 7: Sharpen Your Tactics
Anchors Away
Here’s a question we often ask our negotiation pupils: “Whether you are engaged in buying or selling, should you offer a price first or wait for the other person to do so?”
Most often, people tell us that they would rather wait for the other person to suggest a price. They point out that letting the other person go first provides useful information to them about the other party’s BATNA and interests. While that is true, letting them make the first offer may not be the correct answer. Whether you are buying or selling, it can be best for you to be the first to offer a price.
The theory behind this conclusion, supported by tons of empirical evidence, is that the first price on the table acts as an anchor to the negotiation. As our colleague David Lax likes to say, an anchor is like an X-ray, invisible but powerful. It acts to skew the ultimate conclusion of the negotiation towards the number offered...
...What if the other person drops his anchor before you have a chance?...
...The point we are making here is that you want to think explicitly about the pros and cons of anchoring before you get to the table. If you make the first offer, you may influence the results of the negotiations in ways you find attractive. On the other hand, if you let them make the first offer, you will gain valuable information, but then you might have to think carefully about how to “re-anchor” the discussion. There is no right or wrong answer here. We’d just like you to be prepared one way or the other.