When your anchor sinks your boat: Information asymmetry in distributive negotiations and the disadvantage of making the first offer

Abstract

The literature on behavioral decision-making and negotiations to date usually advocates first-mover advantage in distributive negotiations, and bases this preference on the anchoring heuristic. In the following paper, we suggest that the preference for moving first vs. moving second in negotiations may not be as clear-cut as presumed, especially in situations characterized by information asymmetry between negotiating counterparts. In Study 1, we examined people’s initiation preferences and found that unless taught otherwise, people intuitively often prefer to move second. In Studies 2–4, we experimentally tested the suggested advantage of moving second, and demonstrated that in information-asymmetry scenarios – when one party has perfect background information and the other has none — it is actually preferable for both counterparts not to give the first offer while negotiating. We discuss the implications of our findings on the field of negotiation and decision-making, and lay the groundwork for future studies examining this issue.

Keywords

• first offer
• anchoring
• negotiation
• second offer
• second-mover advantage
• information asymmetry