Anchor points, reference points, and counteroffers in negotiations

Based on the theoretical assumptions that counteroffers are generated throu gh an anchoring-and-adjustment process and that offers are perceived as gai ns or losses relative to a reference point, predictions were made of how, i n a price negotiation, the size of counteroffers vary with proposed selling prices and reservation prices. The predictions were confirmed in two exper iments. In Experiment 1, 64 undergraduate students of business administrati on playing the role of buyers of condominiums were presented proposed selli ng prices and asked to give a counteroffer which a hypothetical seller woul d accept or reject. A reference point was induced by telling subjects their reservation price. Before giving a counteroffer subjects were asked to ind icate whether it was higher or lower than an arbitrary anchor point. In fou r different groups of subjects, high vs. low reference point was crossed wi th high vs. low anchor point. The results showed as expected that the count eroffers were higher for a high than for a low anchor point, and higher for a high reference point when the anchor point was perceived as a gain than for a low reference point when the anchor point was perceived as a loss. In Experiment 2 in which another 48 undergraduate students of business admini stration participated, the anchor points were the proposed selling prices a nd the reference point (reservation price) was manipulated by providing est imates of the market price. The results were as predicted, thus suggesting that the proposed selling prices operated as anchor points and that the est imated market prices affected the reservation prices (reference points) so that the selling prices and estimated market prices jointly affected the co unteroffers.