Negotiation: Which Side Should Set The Starting Price?
According to an excellent write up of this Galinsky paper at Mind Hacks the short answer is: The side that wants to get the best deal.
The first number offered acts as an anchor. Individuals then reflexively tend to look for information that is consistent with, and so to them confirms, that the number is indeed legitimate. People tend to take the first number as a working hypothesis and so, as with any hypothesis that does not produce an immediate rejection, this first number too often induces people to recall and magnify supporting data while failing to recall or underestimating contradictory data. Is there a way to protect against this effect?
The author suggests that 1) despite the advice of many books on negotiation that recommend waiting for the other side to go first, several studies demonstrate that the buyer, or defendant, will do better by going first with a low offer; 2) when faced with a high demand the buyer (defendant) should focus on information inconsistent with the first offer; and, 3) the initial focus should be on the buyer's / defendant's ideal price by recapitulating the basis for the buyer's / defendant's valuation.
