Who Names the Price First: Anchoring in Negotiations and What the Research Shows

One of the most persistent pieces of advice in business literature goes like this: never name the price first. Wait for the other side to make the opening move. Do not show your cards. Let them state their position first.

It sounds reasonable. And it is wrong roughly half the time.

Over the past fifty years, negotiation research has accumulated enough data to provide a more precise answer to the question, “Who should name the price first?” The answer depends neither on temperament nor on principles, but on the structure of the particular negotiation. Understanding that structure means gaining a real advantage.

Where the Power of the First Number Comes From

In 1974, Daniel Kahneman and Amos Tversky conducted one of the best-known experiments in behavioral economics. Participants spun a roulette wheel that had been deliberately rigged to stop at either 10 or 65. They were then asked a question entirely unrelated to the wheel: What percentage of African countries are members of the United Nations?

Those whose wheel stopped at 10 answered 25% on average. Those whose wheel stopped at 65 answered 45% on average. A random, demonstrably meaningless number shifted the estimate by twenty percentage points. Kahneman and Tversky called this phenomenon anchoring: the first number to enter a person’s perceptual field becomes the reference point from which that person adjusts their judgments. The adjustment is almost always insufficient.

This was published in the journal Science in 1974 and has since been replicated in hundreds of experiments. Anchoring does not work only with arbitrary numbers; it works with any initial values, including the first offers in negotiations.

What Direct Negotiation Research Has Shown

In 2001, Adam Galinsky and Thomas Mussweiler of Northwestern University published a series of three experiments in the Journal of Personality and Social Psychology that directly examined the role of the first offer in negotiations. It is one of the most frequently cited studies in negotiation research.

The key findings: In all three experiments, the party that made the first offer achieved a better final outcome, regardless of whether it was the seller or the buyer. In a study involving the sale of a chemical plant, the authors recorded a correlation of 0.85 between the first offer and the final transaction price. This is a very high correlation: it means that the outcome of the negotiation followed almost linearly from the figure with which the discussion began.

A meta-analysis by Orr and Guthrie (2005) synthesized data from several studies and confirmed a stable correlation of 0.497 between the first offer and the outcome of the negotiation. This is not absolute determination, but the signal is strong enough to take into account in every transaction.

A meta-analysis of 90 studies led by Professor Hannes Petrowsky of Leuphana University (Germany) showed that, all else being equal, when a negotiator is well informed about the market value of the subject and prepared to justify their figure, moving first provides a systematic advantage.

The mechanism is the same one described by Kahneman: the first offer activates information in the other party’s mind that is consistent with that number. The person begins thinking relative to it, higher or lower, rather than relative to some independent assessment. All subsequent counteroffers shift in the direction of the initial anchor.

When Moving First Helps, and When It Does Not

It is important to pause here and note what the research shows just as clearly: moving first is not always beneficial. The rule has clear exceptions, and ignoring them produces the opposite effect.

When moving first works in your favor. You know the market value and the range of reasonable offers well. You have a strong alternative to the deal (a strong BATNA, or best alternative to a negotiated agreement). You are prepared to support your figure with specific arguments. Under these conditions, the first offer sets the frame, and Galinsky’s research confirms that confidence and knowledge determine whether moving first will provide an advantage.

When moving first works against you. Maaravi and Levy’s 2017 study showed that in situations of pronounced information asymmetry, when one party knows substantially more about the subject than the other, making the first offer is disadvantageous for both sides. For the less-informed party, this creates the risk of naming a figure that turns out to be either insultingly low or clearly favorable to the other side. In that case, the first offer reveals the limits of your knowledge rather than establishing an anchor in your favor.

Research by Magee, Galinsky, and Gruenfeld (2007) adds another factor: negotiators with a weak BATNA, meaning a poor alternative if the deal does not go through, make the first offer less often and benefit less from doing so. Moving first works well from a position of strength and poorly from a position of need.

A separate study recorded an unexpected result: adding arguments to a first offer reduces its effectiveness. When you accompany your figure with explanations of why it is what it is, the other side begins looking for counterarguments, and its next offer ends up farther from your figure than it would have if you had stated the figure without explanation. A bare number anchors more strongly than an argued number.

How to Protect Yourself Against Someone Else’s Anchor

In the same 2001 paper, Galinsky and Mussweiler also examined the reverse question: What should you do if the other side makes the first offer? Their experiments identified several countermeasures that significantly reduce the strength of the other party’s anchor.

The first is to focus on the counterparty’s alternatives rather than on its offer. When you think about what the other side will do if the deal does not happen, you stop processing information relative to its anchor. This breaks the mechanism.

The second is to focus on the counterparty’s reservation price. A reservation price is the minimum amount the other side is willing to accept. When you think about this figure, even if you do not know it exactly and are estimating it approximately, you create a competing reference point in your mind that reduces the anchor’s influence.

The third is to focus on your own target price before the other side names theirs. If you set your target figure before the negotiation and keep it in focus, the other party’s first offer has less power over your judgments.

All three methods worked in Galinsky’s experiments: in each of the three experiments, applying these countermeasures completely eliminated the advantage held by the party that made the first offer.

The Extreme Anchor: When Too Much Is Too Much

A separate question is how aggressive the first offer should be. The logic of anchoring suggests that the higher the first number, the higher the final result. Research shows that this works up to a certain point.

An extremely aggressive anchor may be perceived as insulting or may signal the other party’s incompetence. In such cases, negotiations either reach an impasse or the other side completely ignores the anchor and reconstructs the situation from scratch. Research on extreme anchors finds that the anchoring effect persists with aggressive but plausible figures. Numbers outside the plausible range lose their anchoring power.

The practical implication is that the first offer should be ambitious relative to what you are actually prepared to accept, while remaining within a range that the other side will perceive as serious.

What This Means for an Entrepreneur

Several implications follow directly from the research.

Prepare for negotiations using three numbers. Your target figure, the best realistic outcome; your reservation price, the minimum you will accept; and the other side’s presumed reservation price, the minimum they will accept. These three numbers structure your perception and reduce your vulnerability to someone else’s anchor.

Make the first offer when you are better informed than the other side. If you know the market, value, and range better, anchor first. If the other side knows more, wait. This is a simple rule that follows directly from the data.

State the figure without supporting arguments. Research shows that providing arguments with the first offer reduces its anchoring power. Justifications are appropriate later, when the other side asks questions.

When receiving someone else’s anchor, activate the countermeasures immediately. Do not process the other party’s number as a given. Before responding, consciously think about their alternative or your own target price. This mechanically reduces the anchor’s influence on your subsequent offers.

Do not confuse moving first with aggression. The first offer is effective not because it exerts psychological pressure, but because it establishes an informational frame. A confident, well-supported figure stated from a position of knowledge works better than an extreme figure stated from a position of need.

What Does Not Work

The universal advice “never name the price first” does not work. It works in situations where information asymmetry is unfavorable to you, but it loses in most other situations. Following it automatically means regularly surrendering an advantage to an informed counterparty.

The opposite extreme, “always anchor first,” does not work either. When the other side knows the market better than you do, making the first offer reveals the weakness of your position more than it establishes an anchor.

Trying to neutralize someone else’s anchor by ignoring it does not work. Psychologically, it is nearly impossible to ignore the first number; it has already been activated in memory. The only effective way to reduce its influence is to create a competing reference point, as Galinsky’s research shows.

Conclusion

The question “Who should name the price first?” has no universal answer, but it does have a structured one. Moving first provides an advantage when you are well informed, prepared to support your figure, and negotiating with a strong alternative in hand. It works against you when the other side knows the market better.

The 0.497 correlation between the first offer and the outcome of the negotiation, recorded in the meta-analysis, means that roughly half of the variation in the final price is explained by the figure with which the discussion began. This is not determination, but it is too large a lever to ignore before every significant negotiation.

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Sources:

1. Tversky, A., and Kahneman, D. Judgment Under Uncertainty: Heuristics and Biases // Science, 1974, 185(4157): 1124–1131. — https://doi.org/10.1126/science.185.4157.1124

2. Galinsky, A.D., and Mussweiler, T. First Offers as Anchors: The Role of Perspective-Taking and Negotiator Focus // Journal of Personality and Social Psychology, 2001, 81(4): 657–669. — https://doi.org/10.1037/0022-3514.81.4.657

3. Orr, D., and Guthrie, C. Anchoring, Information, Expertise, and Negotiation // Ohio State Journal on Dispute Resolution, 2005. Meta-analysis, r = .497 between the first offer and the outcome. — https://core.ac.uk/download/pdf/159588683.pdf

4. Magee, J., Galinsky, A.D., and Gruenfeld, D.H. Power, Propensity to Negotiate, and Moving First in Competitive Interactions // Personality and Social Psychology Bulletin, 2007, 33(2): 200–212. — https://doi.org/10.1177/0146167206294413

5. Maaravi, Y., Ganzach, Y., and Pazit, A. When Familiar Anchors Hurt You: The Negative Effect of All-or-Nothing Thinking // Judgment and Decision Making, 2011 / Maaravi, Y., and Levy, M. When Youths Have More (Information): First-Mover Advantage in Negotiations // Journal of Behavioral Decision Making, 2017. — https://onlinelibrary.wiley.com/doi/abs/10.1002/bdm.1980

6. Petrowsky, H.M., et al. When to Make the First Offer in Negotiations: A Meta-Analysis. Leuphana University of Lüneburg, 2023. — https://www.pon.harvard.edu/daily/negotiation-skills-daily/when-to-make-the-first-offer-in-negotiations