The First Offer Dilemma
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The First Offer Dilemma is nothing new to us negotiators.
When the negotiation begins, the discussions become more complex, we may start to internalise and bit by bit, doubt may trickle in.
“I should make that first move but I don’t want to give away too much information”
“I’m losing control of this discussion and I need to assert myself, should I jump in now and make an offer?”
While excellent preparation does help solve these problems, negotiations don’t always go to plan, one’s perspective on the situation shifts.
I propose a number of reasons why making the first offer work to your advantage and for you to get perspective on how it looks coming from the other side.
A notable psychological predisposition in negotiation and in different settings, the anchoring bias depicts the basic propensity to give a lot of weight to the first number set forth in a conversation and afterwards insufficiently modify from that beginning number, or the “anchor.” We even focus on anchors when we realize they are immaterial to the current conversation.
Research on anchoring bias has demonstrated that negotiators might have the option to get an edge by making the first offer. The choice of whether to make the first offer by and large ought to be founded on two factors: your insight into the zone of possible agreement, or ZOPA—that is, the scope of alternatives that ought to be satisfactory to the two sides—and your appraisal of the opposite side’s information on the ZOPA.
At the point when you accept the other party likely knows more than you do about the size of the ZOPA, you will experience issues anchoring successfully. Prior to making a stop in such circumstances, arm yourself with however much data as could be expected.
On the off chance that the two sides have a solid feeling of the zone of possible agreement (ZOPA), on account of a long-lasting connection between a provider and client with open books, anchors are probably not going to have a solid effect. If neither side thinks a lot about the size of the zone of possible agreement (ZOPA), you might have the option to successfully drop an anchor, however you could risk being too concessionary or excessively requesting.
When you know a lot about the market, you can make a forceful first idea with certainty and expect that your offer will anchor the conversation furthering your potential benefit.
Subsequent to defusing the anchor, move rapidly to your counter-proposal, with the advice to reference our anchor unequivocally and more than once. At that point, make sure to clarify why it is reasonable and legitimate.
In summary, it is a good idea to make the first offer and make it an anchor for the negotiation if you know the market very well, ideally better than your counterpart. If you make an anchor, make sure to explain at length why it is a legitimate anchor, as this increases the strength of your anchor.
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