Recently I had the pleasure of meeting mediator and attorney, Vickie Pynchon. She introduced me to this concept of making the 1st offer (see previous post of mine) and the issue is continued on her Settle It Now blog.
"Hmm, anchoring to support aggressive opening bids? Doubtful, despite the academic literature -which in my opinion has little contact with real negotiation.
And nothing about coordination versus nash equilibrium reasoning? Big oversight, in my opinion.
Because I respect (and generally defer to) Michael's opinion, but because I disagree with him this time, I include here my response and open the discussion to our readers. To help our readers, I'd like to ask Michael, if he has the time, to provide us with his thoughts about the coordination v. nash equilibrium reasoning that is absent from my Power Point Presentation (an absence I'd like to rectify before giving this presentation on the 13th of November)
Response to Michael:
For once in my blogging-career, Michael, I'm going to differ with you but ask for help on the coordination v. Nash equilibrium reasoning.
It's difficult to "observe" the effects of anchoring and framing outside of a controlled environment. You need to have a kind of duplicate bridge experience where the bargaining partners are all negotiating the same deal to determine the effects of framing and anchoring. Research shows we'll all deny that we've been effected.
I have, however, participated in these types of role plays with "teams" of seasoned attorney negotiators.
In fact, it was the first of these experiences, on my first day of mediation training through the Straus Institute here in Malibu (at Pepperdine where the fires were yesterday -- terrible) that I experienced the power of anchoring first hand.
All twenty attorney teams negotiated a buy-sell contract for about 45-minutes. When we returned to the classroom, we all put our negotiated deals on the blackboard together with the first offer made.
I'd been taught as a young attorney NEVER to make the first offer -- folk practice where I come from, i.e., California. In the role play, without exception, the negotiator who made the first offer in the hypothetical bargaining session got the best deal -- often by many magnitudes.
THIS is the moment when I decided I wanted to return to school to learn more about this and everything else having to do with negotiation -- rules of persuasion, the effect of cognitive biases, etc.
Since that time, what I've read in the academic literature on controlled negotiation studies, not only on students but on judges and attorneys and business people, has concluded that he who makes the first offer sets the bargaining range and gets the best deal.
As to Personal Bargaining Experience.
Since I've been mediating full time, I've helped lawyers negotiate hundreds of deals. Still, it's difficult for me to say whether the first offer had a substantial anchoring effect because I don't know how the negotiation would have turned out had the other side made the first offer or if the first offer had not been more or less aggressive. "
Also look at the comments on her blog. I like :
"Hello Victoria, From experience of dealing with "Travellers" -Irish roadside dwellers and dealers- I have to agree with you. About every second year I buy something from them, just to watch their methods and they always open high and early. They beat any academic for putting manners on a person. . . "