My co-authors Hannes Petrowsky, Burkhardt Funk, and David Loschelder (all Leuphana University) published a new paper to answer an old question: How high should the first offer be in a negotiation?
You can read more about the paper and download it here.
What do we find?
Negotiators typically struggle to identify an optimal first offer that navigates the tension between securing a low price and avoiding negotiation impasse.
We analyzed 26 million real-world negotiations on eBay and found that the best first offer for buyers is generally around 80% of the listing price. However, this can vary from 33% to 95% based on the type of product, market demand, and the buyer’s valuation of price against the risk of negotiation impasse.
Our challenges the common notion that buyers and sellers usually meet halfway between first offer and counteroffer, as our results suggest a 'buyer bias' instead.
We used machine learning to predict negotiation impasses and created a website that offers bespoke first-offer advice for different circumstances.