Self Help

Described below is a common tactic used in business and social negotiations – called the “exaggerated first offer” - and a countermeasure that you might consider if the tactic is used on you.

Asking questions is one way of inviting the other party to share information with you, a means of determining how you can help (or hurt) this person. Generally, however, your opponent is not going to come right out and say how much she can spend, unless she believes the offer is well below the market value of the desired goods or services. If you have ever tried to trade in your car, you have experienced this. Car dealers invariably make the first offer on a trade-in typically after you have decided on a new car - and for a fraction of your car’s Blue Book value.

Making an exaggerated first offer (high or low), or at least what seems exaggerated to you, is another way to gather information by checking the reaction of the other party. It could be surprise, disappointment, nonchalance, acceptance, or enthusiasm - each suggesting a different expectation and course of action. Some foreknowledge of how well the other party knows the market value of a proposal could be useful, because it allows you to predict or gauge the response.

Even if the other party refuses your first offer, this tactic could work to your advantage. If the first offer happens to be within the realm of what is acceptable, the offer likely serves as an anchor around which bargaining will center. Most parties recognize this, so they make an offer at least slightly higher or lower than where they want to settle, even employing an odd number in the vicinity of an expected final settlement. For example, if you want to sell for $1,000, you ask for $1,100, hoping that the rounder number ($1,000) ends up as the settlement price.

Of course, going with an exaggerated first offer could offend the other party. You never know, unless you’ve scouted the other party’s position prior to face-to-face negotiating. Or this person might simply be putting on an act, hoping to move you away from the initial offer by appearing shocked or offended. Much depends on how far a field the offer is and also the other party’s alternatives to a negotiated agreement. If you have no information on the other party, or believe that she has few if any alternatives, this tactic could prove helpful.

Countermeasure: One way of dealing with this tactic is to be the first to use it. If you make the first offer, you create the anchor. By exaggerating your “demands,” you may be able to learn something from the other party’s immediate nonverbal behavior.

If the other party makes the first offer, be careful what you signal. An outrageous demand from your opponent could seem quite satisfactory to you, but it might be better to show surprise or disbelief. Or change the subject, moving to a different issue. This signals to your counterpart that the offer is not acceptable, while allowing everyone to save face.