An easy negotiation Trick Could Boost Your Salary
Daniel R. Ames and Malia F. Mason
Corsair Capital highlighted its investment in a special purpose acquisition company in its first-quarter letter to investors. The Corsair team highlighted FG New America Acquisition Corp, emphasizing that the SPAC presents an exciting opportunity after its agreement to merge with OppFi, a leading fintech platform powered by artificial intelligence. Q1 2021 hedge fund letters, conferences Read More
We examined whether and why range offers (e.g., “I want $7,200 to $7,600 for my car”) matter in negotiations. A selective-attention account predicts that motivated and skeptical offer-recipients focus overwhelmingly on the attractive endpoint (i.e., a buyer would hear, in effect, “I want $7,200”). In contrast, we propose a tandem anchoring account, arguing that offer-recipients are often influenced by both endpoints as they judge the offer-maker’s reservation price (i.e., bottom line) as well as how polite they believe an extreme (nonaccommodating) counteroffer would be. In 5 studies, featuring scripted negotiation scenarios and live dyadic negotiations, we find that certain range offers yield improved settlement terms for offer-makers without relational costs, whereas others may yield relationship benefits without deal costs. We clarify the types of range offers that evoke these benefits and identify boundaries to their impact, including range width and extremity. In addition, our studies reveal evidence consistent with 2 proposed mechanisms, one involving an informational effect (both endpoints of range offers can be taken as signals of an offer-maker’s reservation price) and another involving a politeness effect (range offers can make extreme counteroffers seem less polite). Our results have implications for models of negotiation behavior and outcomes and, more broadly, for the nature of social exchange.
Easy Negotiation Trick Could Boost Your Salary – Introduction
Social exchange—the never-ending stream of interpersonal quid pro quos—is an inevitable and important part of life. The potential for positive material and psychological outcomes is great: trades that yield value for both parties involved, agreements that address multiple problems, deals that deepen bonds, and so forth. The potential costs for failed social exchange are equally severe: not just foregone value, but spoiled relations, animosity, and even the seeds of violence. Because of this terrific potential for good or bad outcomes, social scientists are obliged to understand not just how and why people act as they do when they implore, bargain, and trade with others but also the consequences of their actions. A great deal of work in recent decades has done exactly this, shedding light on the conditions that lead to agreements (vs. impasses) and more value (rather than less) for one or more parties in social exchange and negotiation (for reviews, see Bazerman, Curhan, Moore, & Valley, 2000; De Dreu, Beersma, Steinel, & Van Kleef, 2007; Thompson, Wang, & Gunia, 2010). One clear theme in this work is the importance of opening-offer values, which often have profound anchoring effects on negotiated outcomes (e.g., Galinsky & Mussweiler, 2001; Gunia, Swaab, Sivanathan, & Galinsky, 2013; Loschelder, Stuppi, & Trötschel, 2014; Mason, Lee, Wiley, & Ames, 2013; Schweinsberg, Ku, Wang, & Pillutla, 2012). The initial deal terms where proposals begin in social exchange typically have a big effect on where agreements end up.
Although much attention has been paid to the impact of specific initial offer values, we know little about the impact of ranges as opening offers, despite the fact that people often employ them in everyday bargaining episodes. A used-car seller might begin by saying, “I’m looking to get $7,200 to $7,600 for my car.” A job candidate might tell a prospective employer, “I’d like to start at $52,000 to $56,000.” A yard sale shopper might propose to a seller, “I’d buy that couch for $80 to $100.” Does the couch buyer offering “$80 to $100” pay a lower price than one simply offering $80 or $90 or $100? Is the car seller asking “$7,200 to $7,600” likely to get a higher price, or be seen as more flexible or more aggressive, than one who simply asks for $7,200 or $7,600? If ranges do matter, why? We believe these questions have not been resolved by prior research—and that the answers to them hold broader implications for social exchange.
In this article, we consider the dynamics of range offers, first by sketching different schools of thought on whether and why ranges matter, and then presenting five studies that explore their consequences in negotiations. A selective attention perspective, consistent with much contemporary teaching on negotiation, would suggest that offer recipients focus on the “attractive” end of the range—the endpoint that better serves their interests (e.g., a range offer’s low end to a buyer or high end to a seller)—largely ignoring the value at the other end of the range. However, we argue that the values that define range offers have the potential to serve as tandem anchors. We expect this occurs in part because of an informational effect, whereby both points in a range offer shape the offer-recipient’s perception of what constitutes a feasible outcome. We also expect a politeness mechanism may be at work, whereby an extreme counteroffer seems less polite in response to a range offer compared with a point offer. As a result, we believe that a particular kind of range offer—a bolstering range offer (e.g., a seller asking for $7,200 to 7,600 vs. a point offer of $7,200)— often yields improved deal terms, with little or no relational damage.
See full PDF below.