Anchoring and Asymmetry: Strategic Considerations for Making the First Offer
The decision to make the first offer is one I discuss often—in teaching and in practice. Beneath it lies a core strategic tension: the advantage of setting the anchor—a cognitive bias in which the first number offered subtly shapes future judgments—versus the risk of miscalculation when information is incomplete or uneven.
The Anchor Effect
Anchoring is one of the most studied—and most powerful—cognitive biases in negotiation. It refers to our tendency to rely too heavily on the first piece of information we receive when making judgments, even when that number is arbitrary or irrelevant.
Daniel Kahneman and Amos Tversky famously demonstrated this in a simple experiment. In Thinking, Fast and Slow, Kahneman describes how participants were asked whether the percentage of African nations in the UN was higher or lower than a number generated by spinning a wheel—rigged to stop at either 10 or 65. Participants who saw 65 gave significantly higher estimates than those who saw 10. The anchor—random though it was—shaped their judgments without their awareness (Kahneman, 2011).
Subsequent research has confirmed the robustness of the anchoring effect across a wide range of settings: pricing decisions, legal judgments, salary negotiations, and more. A comprehensive review by Furnham and Boo (2011) catalogs dozens of studies confirming that anchoring influences both novices and experts, and that it can be triggered by both relevant and irrelevant cues.
Why does anchoring work? Two leading explanations help clarify. The first is insufficient adjustment: even when negotiators recognize that the initial number may be flawed, they struggle to move far enough away from it. The second, the selective accessibility theory, holds that an anchor activates consistent information in memory—making it more cognitively accessible and more likely to shape judgment.
All of this suggests that making the first offer can be a strategic advantage because the first offeror gets to set the anchor. Numerous studies have shown that, in general, the party who makes the first offer tends to capture more of the negotiation surplus within the zone of possible agreement (ZOPA)—the range within which a deal can satisfy both parties.
The Risk of Leaving Money on the Table
Of course, the flip side of making the first offer is what happens when you get it wrong—especially in the presence of information asymmetry. If the other party has access to key information you don’t—about their constraints, motivations, alternatives, or internal valuations—your offer may unintentionally define the negotiation range around a mistaken assumption, setting a floor or ceiling that leaves value untapped.
Consider a commercial lease negotiation. A landlord makes what she believes is an aggressive opening offer of $25 per square foot. What she doesn’t know is that the tenant—an expanding retail chain—has a strategic imperative to secure that exact location and has internal authority to go as high as $32. By anchoring at $25, the landlord unintentionally narrows the range of potential agreement and walks away thinking she secured a win—when, in reality, she left $7 per foot on the table. The deal closes, but the unrealized value remains invisible, buried in the asymmetry.
This illustrates how even a well-intentioned anchor can constrain value when the underlying facts are unknown.
Resolving the First-Offer Dilemma
The strategic dilemma, then, is whether to move first and set the anchor—or wait and gather more information to avoid a costly misstep. There’s no one-size-fits-all answer. But a few considerations can help guide the decision, and preparation is critical.
Always have your bottom line—grounded in your best alternative to a negotiated agreement (BATNA)—clearly in mind. If you have a solid estimate of the other party’s bottom line, a well-calibrated first offer can set the stage. If you hold more information than the other side, you may be in a position to benefit from anchoring more aggressively. But if the value zone is uncertain, you may want to elicit more information or let the other side speak first.
While many commentators suggest a general default of going first, negotiator Jim Reiman in Negotiation Simplified argues for a different approach: default to going second. He cautions that negotiators often overestimate how well they understand the other side’s BATNA. Reiman recommends preparing your own first offer in advance, but then letting the counterparty go first. If their offer is better for you than what you would have proposed, you can accept it or improve upon it. If it falls short, you proceed with providing your own reasoned proposal—as if theirs hadn’t been made. It’s a subtle reframing that lets you counteract their anchor without being unduly influenced by it.
There are other strategies for countering the anchor effect when the other party makes the first offer, and I plan to cover those in a future blog post.
If you do make the first move, note that extreme anchors carry potential for capturing surplus but also carry a real potential downside -- that the other party may walk away altogether. Harvard Business School professor Max Bazerman notes in Negotiation: The Game Has Changed that many anchoring studies use students as subjects and who may have a higher tolerance for staying at the bargaining table in the face of an unreasonable offer than actual executives or litigants would.
Another important consideration is whether this is a one-shot negotiation or a part of a longer relationship. In a long-term commercial relationship or professional collaboration, extreme anchors can damage trust, derail momentum, and poison future interactions.
Conclusion
The most effective negotiators understand the psychological pull of anchors—and the importance of timing, context, and preparation. In some situations, the value of anchoring outweighs the risk. In others, patience and information gathering lead to better outcomes.
Knowing when to speak—and when to stay silent—can mean the difference between a subpar deal, maximized outcome, or no deal at all.