Anchoring Effect in Negotiation

Anchoring is a psychological and decision-making phenomenon that holds special significance in the field of negotiations. It refers to the human tendency to base decisions or evaluations on an initial piece of information, known as the “anchor,” which sets and influences the perception of a proposal or agreement’s value. In negotiations, making the first offer can be a strategic advantage, as it can “anchor” the other party to a figure or reference point that will inevitably shape the direction of the negotiation.

How Anchoring Works in Negotiations

The idea behind the anchoring effect is that people tend to give undue weight to the initial information presented, even if, in a different context, it might seem arbitrary or irrelevant. To explore further this topic, we will use as a reference recent research by Remi Smolinki, one of the members of the CABL Faculty, and his colleagues Lipp and Kesting. This research proposes a process model for the strategic use of first offers in negotiations. Their review highlights how, once an anchor is introduced, the other party may find it difficult to move substantially away from that point, thus narrowing the range of alternatives that would otherwise be considered. For instance, if the initial asking price in a real estate negotiation is set at 300,000 euros, this figure will influence the perception even if market conditions suggest a different valuation.

Types of Anchors: How and When to Use Them

In negotiation settings, various types of anchors can be distinguished:

1. Precise Offers: Proposing non-rounded figures (e.g., 297,500 euros instead of 300,000) increases the perception of competence and can be interpreted as an indication of clear knowledge of the true value.
2. Multiple Offers: Simultaneously presenting various alternatives, even within a range, can reinforce the credibility of the offer and reduce the perception of rigidity on the part of the other negotiator.
3. Contextual Anchors: Framing the offer with an external value – such as a market estimate or a previous offer – can further strengthen the impact of the initial anchor.

The Strategic Importance of Anchoring: Advantages and Risks

Using anchoring strategically can yield significant benefits but also carries certain risks. As shown by Smolinski and colleagues, an overly aggressive anchor can trigger negative reactions, such as rejection or negotiation breakdown. Indeed, when the other party perceives the initial offer as unrealistic or manipulative, the risk of an impasse increases. Therefore, the choice of anchor must take into account the context and the sensitivity of the other party; in some cases, a more moderate offer may prove more advantageous in the long run.

Anchoring and Cognitive Processes

Anchoring is also tied to how our brain processes information. Research by Tversky and Kahneman has shown that, when an initial value is presented, the mind tends to seek out confirmations and justifications that make it plausible, rather than exploring alternatives. This effect of “selective accessibility” means that a well-calibrated anchor not only guides the negotiation but creates a mental “frame” that is difficult to break. Smolinski and his colleagues suggest that to reduce the impact of anchoring, it is useful to focus on alternative parameters and strive to contextualize the initial offer.