You find yourself in a negotiation and wonder, “Is it to my advantage to make the first offer, or should I try to get my counterpart to make the first move?” Anchoring might affect the outcome.
Effective use of “Anchoring” can help you achieve better outcomes. Anchoring is the psychological phenomenon in which a number or offer that is mentioned early in the process has the effect of causing subsequent numbers or offers to cluster around it.
When considering anchoring, it’s useful to realize that the person who throws out the first number or offer has a slight advantage in shaping the conversation, in light of that first number. Therefore, all things being equal, you might want to be the first to make an offer. There are risks, however. If your first number is artificially low, you will have anchored below where you should have, and will actually get less than you would have otherwise. If you anchor unrealistically high, you may alienate the other side and damage the relationship, or they may simply walk away. Another risk of anchoring too high is that, if you need to abandon your anchor, you may damage your image by abandoning a position you had asserted earlier, suggesting that it was not a reasonable number to begin with.