Knowledge of precise offers as a negotiating tactic does not reduce its effect on counteroffers

Abstract

Past research has demonstrated that precise first offers (e.g., $4,983) serve as an anchor in negotiations and reduce counteroffers relative to round first offers (e.g., $5,000). Precise offers are frequently perceived as indicating greater competence and knowledge of the person making the offer. Three studies were conducted to determine if knowledge of precise offers as a negotiating tactic would reduce the effect of precision on counteroffers. Precise offers elicited smaller counteroffers than round offers in all three studies, and this effect persisted even when participants were aware of precision as a negotiating tactic. Despite its effectiveness at reducing counteroffers, participants receiving precise offers were more likely to decide to negotiate compared to participants receiving a round offer in two of the three studies. Perceptions of the other party and scale granularity were examined as mediators of the relationship between anchor type (precise or round offer) and counteroffers. Perceived fairness of the offer emerged as a mediator in all three studies. These results suggest that a precise first offer can be effective at reducing counteroffers, even when the other party suspects that it is a negotiating tactic.