“They filed the lawsuit; they should make the first demand”. “We’re not going to make an offer until we know what the opening demand is”. “They are the ones who wanted this mediation; they need to make the first demand”.
How often have you heard, or stated, a variation of this negotiation mantra? From the day I was born, it seems, I have been told that a critical advantage in negotiation is achieved by making the other side make the first move. But recent negotiation studies are raising a serious question about this time-honored assumption.
Psychologists call it “anchoring”. In one study, a group of experienced real estate agents were shown a house, and handed an MLS listing. The listings were identical, except each contained a different “list price”, which is essentially a “first offer”. After the tour the agents were asked to answer four questions: (1) an appropriate list price for the house; (2) an estimate of the appraisal value; (3) a reasonable amount for a buyer to pay for the house; and (4) the lowest amount the seller should accept.
In every response the agents who received the higher list prices thought the house was worth more. And when asked if the list price they had been provided had influenced their answers, 80 percent said, “not at all”.
I Am Not Making This Up
One academic puts it this way: “Our minds tend to give disproportionate weight to the first information we receive when we are required to make decisions”. Students of negotiation professor Charles Craver are asked, in their role of defense counsel on a personal injury claim, how much their client will have to pay to settle the claim. The only variable in the hypothetical is that half the class is told that the opening demand is $60,000; the other half is told $30,000. The students receiving the higher demand almost always conclude that more money will be required to settle, often concluding that more than $30,000 will be required.
How many mediations have you been to where the claimant makes a demand of two million dollars, and the insurance company defendant retaliates with an offer of $5,000 or $10,000? What if the insurer, instead of insisting on the Plaintiff going first, made an opening offer of $30,000, thus anchoring the negotiation? Would the Plaintiff still start at two million? I think not. What do you think?