The Benefits and Costs of Rounding Up in Negotiations

International Center for Cooperation and Conflict Resolution

Do you remember the last time you negotiated? How did you strategize your first offer? If you are like most people, you probably made a round offer to your negotiation partner offering “ballpark” numbers like $1500 instead of $1485.

Many people use rounded offers in negotiations, but recent research suggests that they might not be as effective as negotiators think. Mason, Lee, Wiley, and Ames (2013) found that when initial offers were rounded versus precise, recipients of the offers made larger adjustments to their subsequent counteroffer. Even more, when negotiators made precise first offers (as opposed to rounded offers), their counterparts believed these offers were grounded in logic or thoughtfulness about the worth of the good/service. This ultimately demonstrates how not knowing enough about the good/service being negotiated can adversely impact negotiation outcomes. Overall, Mason and her colleagues (2013) found compelling evidence that precise first offers set stronger anchors for counteroffers, which benefits the individual who makes the first offer. However, they caution that making a precise first offer can have adverse impact on the interpersonal relationship if the offer is too aggressive. They posit that this happens because the negotiation counterpart perceives inflexibility and may believe there isn’t a possible deal (Mason et al., 2013).

This research is important because it can help practitioners strategize appropriately in negotiations, and it highlights the importance of entering a negotiation with knowledge about the good/service of interest. Additionally, these findings suggest that it may be effective to propose more specific negotiation offers in order to communicate your knowledge about the substantive issues, but caution that when such offers are too bold they may impair the negotiating relationship.

Mason, M. F., Lee, A. J., Wiley, E. A., & Ames, D. R. (2013). Precise offers are potent anchors: Conciliatory counteroffers and attributions of knowledge in negotiations. Journal of Experimental Social Psychology, 49(4), 759-763.

                       

Lauren Catenacci

Lauren Catenacci is a PhD student in the Social-Organizational Psychology program. She holds a Master of Arts in Social-Organizational Psychology at Teachers College, Columbia University and two bachelor’s degrees, a Bachelor of Science in Psychology and a Bachelor of Arts in Criminal Justice, from the University of Central Florida. She has… MORE >