First-Offer Disadvantage in Zero-Sum Game Negotiation Outcomes

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First-Offer Disadvantage in Zero-Sum Game Negotiation OutcomesMichael J. Cotter a; James A. Henley Jr. b

a Associate Professor of Marketing, Seidman College of Business, 414C DeVos Center, 401 W. FultonStreet, Grand Valley State University, Grand Rapids, MI, USA b UC Foundation Professor of Marketing,The University of Tennessee at Chattanooga, 615 McCallie Avenue, Chattanooga, TN, USA

To cite this Article Cotter, Michael J. and Henley Jr., James A.(2008) 'First-Offer Disadvantage in Zero-Sum GameNegotiation Outcomes', Journal of Business To Business Marketing, 15: 1, 25 — 44To link to this Article: DOI: 10.1080/15470620801946587URL: http://dx.doi.org/10.1080/15470620801946587

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WBBM1547-06281547-0628Journal of Business-To-Business Marketing, Vol. 15, No. 1, Mar 2008: pp. 0–0Journal of Business-to-Business Marketing

First-Offer Disadvantage in Zero-Sum Game Negotiation Outcomes

Michael J. Cotter and James A. HenleyJournal of Business-To-Business Marketing Michael J. CotterJames A. Henley, Jr.

ABSTRACT. Purpose: This study contrasts the success rates of negotia-tors making the first offer with negotiators making a counter offer duringhigh-stake, zero-sum game bargaining sessions.

Methodology/Approach: The empirical study analyzed negotiators’ firstand counter offer overall success rates and the success rates on each of theten separate negotiations. The bargainers were involved in a series of tenhigh-stakes, zero-sum game negotiations. A total of 1,621 separate negotia-tions were examined.

Findings: The results for the overall negotiations indicate the personmaking the initial offer was significantly less successful than the personmaking the counter offer. For each negotiation in the series, the onlynegotiation in which the first offer was more successful than the counteroffer was the first of the ten negotiations.

Research Implications: A number of studies in negotiation literatureindicate a negotiator’s first offer may influence counteroffers with theeffect labeled anchoring. The results of this study indicate anchoring mayhave an impact only on inexperienced negotiation opponents.

Practical Implications: Results indicate that there is a first-offer advantageonly when dealing with someone with no experience. While knowledge of

Michael J. Cotter (E-mail: [email protected]), D. B. A., is Associate Professorof Marketing, Seidman College of Business, 414C DeVos Center, 401 W. FultonStreet, Grand Valley State University, Grand Rapids, MI 49504.

James A. Henley, Jr. (E-mail: [email protected]), D. B. A., is UC Founda-tion Professor of Marketing, The University of Tennessee at Chattanooga, 615McCallie Avenue, Chattanooga, TN 37403.

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26 JOURNAL OF BUSINESS-TO-BUSINESS MARKETING

strategies and tactics may be useful, without actual negotiation experiencethe novice appears to be at a distinct disadvantage.

Originality/Value/Contribution: This study contributes by offering anexamination of trained, highly motivated negotiators in face-to-faceconfrontations with clear bargaining outcomes.

KEYWORDS. Negotiation, first offer, counter offer, salespeople, bargaining,anchoring

Experience is the name everyone gives to their mistakes.

–Oscar Wilde (1892)

One thorn of experience is worth a whole wilderness of warning.

–James Russell Lowell (1870)

INTRODUCTION

Negotiation is used nearly every day in all aspects of life. Negotiationscould range from business-to-business multi-million dollar sales contractsto daily negotiations among employees for agreements over resources orterms of employment. An individual need only recall her last car purchaseto realize consumers also engage in negotiation. Even in the home, nego-tiation is an essential skill. Parents and children may negotiate over a res-taurant choice or television program to watch. With negotiation such animportant and often implemented tool to gain outcomes, knowledge of theprocess could aid negotiators in developing skills and abilities.

The purpose of this paper is to contrast negotiation outcome success ofnegotiators making the first offer with negotiators making counter offers.The negotiations were obtained from newly trained negotiators involved inface-to-face negotiations in which outcomes involved significant stakes. Inaddition, this paper contrasts with the results reported by Galinsky, andMussweiler in their 2001 study of first offers and moderating variables.

Dealing with Uncertainty

A vexing dimension of negotiation is the need to make specific judgmentsbased on what is often incomplete, vague, misleading, wrong or non-existent


Michael J. Cotter and James A. Henley 27

information. It is the nature of the negotiator’s art to adapt and operate inuncertain circumstances. Research indicates that negotiators such as sales-people can expect bolstered performance by cultivating the flexibility toidentify potential areas of internal similarity with buyers and to buildupon those issues to foster positive perceptions (Lichtenthal and Tellefsen2001). When people are faced with uncertain circumstances in whichjudgments must be made, people lean toward simplifying heuristics forhelp (Tversky and Kahneman 1974). While often these simplifying methodslead to positive results, there is also a chance the tactics will engenderjudgmental biases (Arkes 1991) to the disadvantage of the person, especiallyin a negotiation role.

Anchoring in Negotiation Literature and Conceptual Basis for the Study

In two-party negotiations, one party usually makes the first offer (ini-tial offer) to buy or sell. Both the size and influence of the first offer havebeen subjects of extensive research. In studies involving gender and thesize of the initial offer, Eckel and Grossman (2001) detected women’sinitial offers were more generous than men’s initial offers. However, theirfindings were not statistically significant. Solnick (2001) did not find asignificant difference in the size of the initial offers between the genders,but she did find that women made more generous offers than men whenthe negotiating opponent was male. Although this research stream isinteresting, our study involves the impact of the first offer on outcomes ofthe negotiation process.

In the negotiation literature, a first offer is a particular type of anchor(Orr and Guthrie 2006). The following sections review the literature onanchoring, first offers, and the means to mitigate the impact of anchoring.The final section states the rationale for the study.

Anchoring Literature

Anchoring is a classic judgmental bias in which previously digestedinformation (often numerical) impacts the numerical estimate a personconsiders as reasonable (Tversky and Kahneman 1974). Anchoring hasbeen shown to influence judgments in many areas. For example, Bottomand Paese (1999) found that negotiators who were given positively biasedinformation reached a more profitable outcome than negotiators who didnot receive this information. Two studies found that people fail to consideraccurately the perspective of others because their own experience anchors



their judgment (Gilovich, Medvec, and Savitsky 2000; Gilovich, Savitsky,and Medvec 1998). In marketing, Wansink, Kent, and Hoch (1998)discovered promotions using anchors of multiple-unit pricing and purchaselimits increased quantities purchased. Two studies examined the effectsof property asking prices as anchors and found they influenced negotiatedoutcomes (Black and Diaz 1996; Northcraft and Neale 1987). In accounting,Joyce and Bittle (1981) studied the effects of anchoring on auditors.

The legal profession has been particularly interested in the effects ofanchoring in rulings and negotiated settlements. In a parallel to a firstoffer in negotiation, two articles found that higher monetary requests inthe courtroom led to higher monetary rewards (Hastie, Schkade, andPayne 1999; Malouff and Schutte 1989). Monetary limits had an anchoringeffect on damage awards while punitive damage caps had an anchoringeffect on punitive damages and compensatory damages (Englich andMussweiler 2001; Hinsz and Indahl 1995; Robbennolt and Studebaker1999). In legal decisions, information and demands can act as anchors andinfluence participants. Wistrich, Guthrie, and Rachlinski (2005) foundjudges had difficulty ignoring information that had been declared inad-missible. Raitz, Greene, Goodman, and Loftus (1990) found that testify-ing experts had a major influence on jurors’ decisions. In a startlingfinding, Englich, Mussweiler, and Strack (2006) discovered that evenirrelevant sentencing demands influenced legal professionals.

Anchoring Influence of First Offers

A number of previous studies indicate an opposing negotiator’s firstoffer may impact the type of counter offers and the ultimate negotiationoutcomes (Chertkoff and Conley 1967; Liebert, Smith, Hill, and Keiffer1968; Benton, Kelley, and Liebling 1972; Ritov, I. 1996; Galinsky andMussweiler 2001; Orr and Guthrie 2006). Specifically, in the Liebertet al. (1968) study, negotiators who were unknowledgeable about the bar-gaining parameters were swayed by an extreme position of the first offerposed by their opponent. Extreme first offers by a negotiator were foundto be advantageous in securing favorable outcomes for that negotiator.A study by Yukl (1974) may offer additional evidence suggesting ananchoring effect of the first offer. The study results indicated initial offersare better predictors of final settlement prices than is the followingnegotiation behavior. Another study unearthed evidence that consumersare highly influenced by even irrelevant anchors (Kristensen and Garling2000).



According to Galinsky and Mussweiler (2001), the party that makesthe first offer, regardless of whether the party is a seller or buyer, is morelikely to gain a better outcome. The researchers point to the first offer actingas an anchor point. Theory follows that by making the first offer the partyprotects herself from being influenced if the other party made the firstoffer. Optimally, the negotiator’s first offer acts as an anchor for theopponent’s counter offer. Mussweiler and Strack (1999, 2000) offer anexplanation for the anchor’s influence. They assert that people recallinformation that is consistent with the anchor, which, in turn, makes theindividual more likely to accept the anchor. In negotiation, for example, anegotiator considering a low first offer to sell an item may recall all thedefects in the item and be more likely to accept the first offer or nearer thefirst offer.

Sterbenz and Phillips (2001) discovered a first-mover advantage inbargaining situations with known deadlines and random delays. Theyfound the first-mover advantage was not present when random delayswere eliminated from the bargaining experiment.

Most studies involve distributive agreements or a zero-sum game.Moran and Ritov (2002) studied the effects of first offers in integrativeagreements, which strive to meet the goals of both parties in a negotiationon several issues. Even in this context, they found initial offer anchorsinfluenced each issue affecting the ultimate outcomes.

To obtain an overall view, Orr and Guthrie (2006) conducted a meta-analysis of studies testing the impact of first offers, demands, and otherbeginning figures on price outcomes. They concluded anchoring in theseforms do impact negotiation outcomes. One study discovered 57 percentof the variance in negotiated outcomes is explained by the buyer’s andseller’s initial offer (Poucke and Buelens 2002). After performing theirmeta-analysis, Orr and Guthrie (2006) offered a more conservative estimatethat 25 percent of the variance in outcomes is explained by the initial offer.

Overcoming the First Offer

Researchers have found anchor-induced initial beliefs are mitigatedwhen inconsistent information with the anchor and/or additional informa-tion are considered. Lord, Lepper, and Preston (1984) speculated thatconsidering information contrary to an anchor or first offer might allowthe negotiator making a second offer to overcome the anchoring effects.Mussweiler, Strack, and Pfeiffer (2000) found the anchoring effect wasreduced when negotiators concentrated on reasons that the anchor was



inappropriate. Chapman and Johnson (1999) discovered the anchor influ-ence may be reduced by negotiators who focused on features of a negotiateditem that are different from the anchor. Kristen and Garling (2000)revealed market price information might help a negotiator overcome theinfluence of an anchor. Although Galinsky and Mussweiler (2001) did notfind a counter-offer advantage, they did find that negotiators could neu-tralize the effect of a first-offer anchor by considering their opponent’sbest alternative to an agreement. Interestingly, considering a best alternativeto an agreement also influences the first offer (Buelens and Poucke 2004).Wansink, Kent, and Hoch (1998) uncovered evidence that anchoring canbe reduced when negotiators use internal anchors to counter promotionsbased on anchors.

Other researchers have found that internal motivations can help to easean anchor’s impact. Galinsky and Mussweiler (2001) found negotiatorsconcentrating on their target goal for the negotiation reduced the anchor’spower. White and Neale (1994) uncovered evidence that negotiator aspi-rations can sway negotiation outcomes.

Experience is another variable researchers have considered as a possiblemitigating variable on an anchor. There is evidence that anchoring influ-ences both experts and novices. Northcraft and Neale (1987) found statedreal estate prices had an anchoring effect on both real estate professionalsand students. Guthrie, Rachlinski, and Wistrich (2001) discovered in astudy of 167 judges that anchoring also affects their judgments. Englich andMussweiler (2001) also found that sentencing demands influences judges,and its effects were independent of the judges’ experience. Furthermore,another judicial study revealed anchors of irrelevant sentencing demandsinfluenced experienced judges and prosecutors (Englich, Mussweiler, andStrack 2006).

Clearly, there is evidence an anchor can impact experienced subjects.However, there is also evidence showing that experience can reduce theanchor influence. In a study to determine the ability of negotiators toadjust to the perspective their counterparts, Neale and Bazerman (1983)found, in an experiment where the negotiators performed two separatenegotiations, an improved ability of the negotiators to adjust in the secondnegotiation. They attributed this increased ability to experience gained inthe first negotiation. Orr and Guthrie (2006) examined novices andexperts with previous negotiation experience in their meta-analysis andconcluded that experts do have some ability to reduce the influence ofanchoring. They go on to recommend that individuals that need to negotiatehire expert negotiators.



Inconsistent Research Designs

Caution must be used in comparing past study results since theresearch designs varied. For example, the Chertkoff and Conley (1967)and Liebert et al. (1968) studies controlled the responses of either thenegotiator making the first offer or the negotiator who responded to thefirst offer. Further, those studies were performed such that negotiatorswere not in one another’s presence.

The Sterbenz and Phillips (2001) study had experiment subjects whodid not communicate face-to-face and the stake to be allocated in eachnegotiation was seven dollars. According to the authors, the difference inearnings between the first-mover and competitor was 6% of the total prize,or 42 cents. The authors did not comment on the impact of negotiationexperience on results for the experiment subjects over the course of the tennegotiations.

The Galinsky and Mussweiler (2001) article describes three experiments.In describing the details, the authors state one experiment had negotiatorscorresponded by e-mail while the other two experiments were face-to-face. No information was offered about the negotiation time period or thepersonal stakes of the negotiation outcomes for the negotiators.

In performing a meta-analysis, Orr and Guthrie (2006) were able toovercome many of the differences in research designs. By cumulatingstudies on a particular research question, a meta-analysis reduces biasesor flaws one particular study may have and gives a more powerful answerthe overall research question. Consequently, Orr and Guthrie’s (2006)conclusions are authoritative when they state that an anchor has a signifi-cant influence in negotiation, while additional information and negotiatorexperience dilutes the anchor’s power.

Conceptual Basis of the Study

A review of the literature indicates a large body of evidence that con-cludes anchors and first offers, in particular, do have influence on finaloutcomes (Orr and Guthrie 2006). If only this information is considered,our study results should also show a first-offer advantage. However, thereview of the literature also shows there are means to assuage the first-offerinfluence (Orr and Guthrie 2006).

One method of tempering the first-offer impact on a negotiation is tooffer additional information (Orr and Guthrie 2006). Our study did notprovide the negotiators with any additional information and we did notexpect any lessening of the first-offer influence from this source.



Another method to reduce an anchor’s power is to consider internalgoals and aspirations (Galinsky and Mussweiler 2001; White and Neale1994). As described in the methodology section, the student negotiators inthis study were highly motivated because 50 percent of their course gradewas dependent on their negotiation performance outcomes.

The literature further revealed experience could also reduce the influ-ence of a first offer (Orr and Guthrie 2006). The present empirical researchtakes into account the impact of experience on the power of the openingoffer to generate a distributive advantage. To directly contrast our studywith that of Galinsky and Mussweiler (2001), our study assesses theopening-offer advantage over the course of ten separate negotiationswhile the Galinsky and Mussweiler study examines subjects on their firstnegotiation alone. In our study, each of the ten negotiations occurred ondifferent days. For the face-to-face negotiations in the Galinsky and Muss-weiler study, the negotiators negotiated on the first day of class, whichmay have effectively precluded any training prior to the negotiation.

Combining increasing experience with the student negotiator’s strongdesire to perform well in the negotiations, we were eager to learn if therewas evidence of improvement in the negotiator’s ability to counter theimpact of a first offer. Our results may cast more light on the issue of afirst-offer advantage over the course of a learning curve.

Negotiation Data

Negotiation outcomes were obtained from 1,621 separate negotiations.The negotiators were junior, senior, and graduate students taking a negoti-ation class at a university located in the Midwest with approximately23,000 students. The student negotiations were a requirement for thecourse and the students’ successes or failures in the negotiations directlyaffected 50 percent of their total grade. The negotiation results were collectedfrom 1999 through 2006.

Each student in the course was given the opportunity to complete tenface-to-face negotiations with another student selected at random by theprofessor. Each of the ten negotiations took place on a separate day. Theprofessor determined whether the buyer or seller made the first offer.The professor also generated unique buyer and seller production costsfor each pairing that assured an opportunity for profit in the negotiation.To give no knowledge advantage to any negotiator, the professorprovided no product identification to the negotiators. In summation, thenegotiators had no control over start or end time in the negotiation,



specific contract variables negotiated, cost information associated withthe variables, negotiation partner, who made the initial offer, and whoacted as buyer or seller. The effort was made to eliminate participants’capacity to game the negotiation system for advantage.

The procedure was to distribute unique cost information sheets to eachspecific student for the negotiation. Each negotiation between each pair ofstudents for all ten negotiations had unique cost information for the“buyer” and “seller.” Next, an overhead transparency was displayed toshow random partner match-ups and signify “buyer” and “seller” roles inthis negotiation and who must make the initial offer. The students foundtheir partner, received a “contract” sheet from the professor to fill out andspecify dollar agreements and began negotiating face-to-face. The professordisplayed the number of minutes available for the negotiation. The actuallength of the negotiation was dependent on the number of negotiationvariables, but lasted between 25 to 35 minutes. The negotiation timeremaining was updated every few minutes and displayed by the professor.Students negotiated an agreement, calculated a final figure for the deal,and brought the completed “contract” to the professor.

Each participant’s objective was to negotiate the higher percentage ofthe available profit on specific variables given in the negotiation. Thenumber of variables was between five and ten per negotiation and each hada separate price that figured in the total deal. For example, assume the“buyer” was told to make the initial offer and had information showing shecould make a product for a total of $50,000. Assume the “seller” was toldto make the counter offer had information indicating he could make theproduct for $30,000. If the negotiation led to an agreement for $40,000,then each party earned 50 percent of the available $20,000 profit potentialin the deal. If the negotiation led to an agreement for $45,000, then the“buyer” who made the initial offer earned 25 percent of the potential profitwhile the “seller” who made the counteroffer earned 75 ercent.

The participants had to complete each negotiation or both negotiatorsreceived a zero for the negotiation. Absent students received a zero for thenegotiation. Consequently, students were highly motivated to attend classand complete an agreement. For the purposes of this study, absences andnegotiations ending without agreements were not included in the analysis.

Participant Motivation

It is a common practice in studies of negotiation outcomes to use studentsamples for the data, and our study is no exception. However, this study



varied in two important respects to most negotiation outcome studies. Thefirst was the intense level of motivation for positive negotiation outcomesfor our participants. The second was the level of training for our negotiationparticipants.

It is routine to see negotiation studies use student samples (Stuhlmacherand Walters 1999). The problem with using students is their degree ofmotivation to achieve successful negotiation outcomes. Some studies donot mention the stakes for the study participants (Kimmel, Pruitt,Magenau, Konar-Goldband, and Carnevale 1980; Galinsky and Mussweiler2001). Some studies recognized this problem with the outcome stakes anddesigned monetary rewards for their participants. Because of the financiallimitations of the studies, the rewards for the successful participants wereusually small (Eckel and Grossman 2001; Solnick 2001).

Using student participants with an unknown level of motivation toachieve successful results immediately brings to mind the relevance of thefindings for the general population of negotiators. For samples usingmonetary rewards, the level of motivation to achieve successful resultswould be higher. However, if the monetary rewards are low, the motivationmay still not be the equivalent to situations where company profits and anegotiator’s reputation and career are at stake.

Our study attempts to overcome the low motivation of student partici-pants by making negotiation outcomes a significant part of the overall gradefor the course. With 50 percent of their grades at stake with negotiationoutcomes, the level of motivation appears high among the students. Theirmotivation intensity levels are even higher because the negotiations are azero-sum game. Successful performance by student negotiators meansunsuccessful performance by their opponents, which directly impactstheir grades. So high was the intensity of the negotiations and the stresslevels of the students that emotional outbursts were common althoughstrongly discouraged.

Another area of difference for our study was the level of training forthe student negotiator. Participants in this study received negotiationtraining for half a semester (24 classroom hours) before the actualnegotiations started. Other studies used little or no training for participants.For example, Stevens, Bavetta, and Gist (1993) also trained their students,but for only six hours. Galinsky and Mussweiler (2001) also used studentsfrom a negotiation class in their study. However, two of their experimentswere conducted on the first day of class, and a third was conducted bye-mail between the first and third week of class. Consequently, little or notraining was available to the students.



Negotiation Hypotheses

Eleven hypotheses were tested for the study. Hypotheses 1 through10 represent a series of ten negotiations: H1 the first negotiation, H2 thesecond, etc. The successive negotiations allow the examination of nego-tiation experience on the outcomes. A comparison was made for each ofthe ten negotiations between the negotiation outcomes of negotiatorsdirected to make the initial offers and those directed to make thecounter offers. In addition to analyzing each of the ten negotiationresults, the total negotiation results were also compared. Hypothesis 11compared the overall outcomes for initial offer negotiators and counteroffer negotiators.

Hypotheses Testing

We were interested in contrasting negotiation outcomes for those nego-tiators who made the initial offer with those negotiators who made thecounter offer. The equality hypotheses stated in the null form were testedusing a two-tailed t-test to detect both size and direction of any differencein the outcome means of the negotiator making the first offer and that ofthe negotiator making the counteroffer.

The t-test is appropriate when the mean of the null hypothesis is knownand the stand deviation is unknown. Since the population size in allhypotheses test are considerably greater than 30, the population of scoreswere assumed to be normally distributed (Pagano 1990). With the t-testfor each hypothesis, we analyze the difference between the negotiationresult means of the negotiator making the first offer and the negotiatormaking the counteroffer. The statistical software used in the analysis wasSPSS 12.0.1.

A p-value of less than .05 was the criterion for differences in means tobe considered significant. Hypothesis rejection is evidence of initial offerposition advantage or disadvantage compared to the counter-offer posi-tion. The hypotheses are stated in Table 1 and the statistical assessmentresults are stated in Table 2.

Results for Initial Offer Negotiators vs. Counter Offer Negotiators

Table 2 shows the mean selling scores of the negotiators making thecounter offer were higher than the mean selling scores of the negotiators mak-ing the initial offer in nine of the ten negotiation situations (H2 through H10)



and the overall negotiation results (H11). Interestingly, the one situationwhere the mean selling score of the negotiators making the initial offer had ahigher score was the first negotiation (H1).

TABLE 1. Hypotheses

H1: There was no difference in negotiation results between negotiators making the initial offer and those making the counter offer during the first negotiation encounter.

H2: There was no difference in negotiation results between negotiators making the initial offer and those making the counter offer during the second negotiation encounter.

H3: There was no difference in negotiation results between negotiators making the initial offer and those making the counter offer during the third negotiation encounter.

H4: There was no difference in negotiation results between negotiators making the initial offer and those making the counter offer during the fourth negotiation encounter.

H5: There was no difference in negotiation results between negotiators making the initial offer and those making the counter offer during the fifth negotiation encounter.

H6: There was no difference in negotiation results between negotiators making the initial offer and those making the counter offer during the sixth negotiation encounter.

H7: There was no difference in negotiation results between negotiators making the initial offer and those making the counter offer during the seventh negotiation encounter.

H8: There was no difference in negotiation results between negotiators making the initial offer and those making the counter offer during the eighth negotiation encounter.

H9: There was no difference in negotiation results between negotiators making the initial offer and those making the counter offer during the ninth negotiation encounter.

H10: There was no difference in negotiation results between negotiators making the initial offer and those making the counter offer during the tenth negotiation encounter.

H11: There was no difference in negotiation results between negotiators making the initial offer and those making the counter offer.

TABLE 2. Hypotheses test results

Hypothesis and negotiation

Initial offer mean selling

score of 100%

Counter offer mean selling

score of 100%

p-Value Sample size

Standard deviation

H1 First 54.24% 45.76% .026 168 37.18%H2 Second 45.95% 54.05% .014 167 29.97%H3 Third 48.24% 51.76% .196 152 30.22%H4 Fourth 49.08% 50.92% .533 161 25.97%H5 Fifth 49.79% 50.21% .875 157 23.96%H6 Sixth 46.24% 53.76% .008 160 26.35%H7 Seventh 47.43% 52.57% .038 162 22.27%H8 Eighth 47.21% 52.79% .01 164 19.45%H9 Ninth 45.84% 54.16% < .001 170 18.83%H10 Tenth 49.47% 50.53% .548 160 23.53%H11 Overall 48.35% 51.65% < .001 1621 26.39%



Of the ten hypotheses representing the ten negotiations (H1 throughH10), Table 2 also shows that six of the hypotheses were found to havesignificant differences between the initial offer and counter offer meanselling scores. In negotiation one (H1), the mean selling score of thenegotiators making the initial offer was higher than the mean selling scoreof the negotiators making the counter offer, and the difference betweenmeans was significant. Consequently, the null H1 was rejected. InHypotheses 2, 6, 7, 8, and 9 the mean selling scores of the negotiatorsmaking the counter offer was higher than the mean selling scores of thenegotiators making the initial offer, and the differences were significantin each negotiation. Therefore the nulls H2, H6, H7, H8, and H9 wererejected. Hypotheses 3, 4, 5, and 10 also had a higher mean selling scoresof the negotiators making the counter offer than mean selling scores of thenegotiators making the initial offer, but the differences in means were notlarge enough to be considered significant. As a result, the nulls H3, H4,H5, and H10 could not be rejected.

In the Hypothesis 11 representing all of the negotiations, the meanselling score of the negotiators making the counter offer was higher thanthe mean selling score of the negotiators making the initial offer, and thedifference between the means was significant. Accordingly, H11 wasrejected.

DISCUSSION

The overall objective of this paper is to compare the outcomes ofnegotiators in a zero-sum game situation who make the initial offer andthose who make the counter offer. Hypothesis 11 examined the overallresults. Hypotheses 1 through 10 considered the results of the negotiationsas participants gained increasing experience in negotiation.

The rejection of Hypothesis 11 (p < .001) indicated a difference inthe outcome of those placed in a position of making the first offer com-pared to those who made the counter offer without regard to subject negoti-ation experience. Those making the initial offer had lower outcomes(48.35% of 100% possible) compared to those making the counter offer(51.65%).

It was interesting to note that in the first negotiation (H1) alone, theparty making the first offer earned a significantly higher average outcome(54.24%) than the party making the counter offer (45.76%). The averageoutcomes of the final nine negotiations showed the party making the first



offer generated a lower outcome than the party making the counter offerin all nine cases, with five cases resulting in statistically significantdifferences. This analysis lends little credence to the notion that the partymaking the first offer in a negotiation has an advantage. Perhaps there is afirst offer advantage, but only when dealing with someone with no experi-ence. Even with training, the subjects in this study apparently wereswayed by the power of the first offer during their first negotiationexperience. However, after that first negotiation, the party who made thecounter offer showed no effects of laboring under the weight of theanchor. Much to the contrary, outcome results indicate those making thecounter offer appeared to enjoy the advantage.

So, perhaps there is a first-offer advantage when dealing with a novice,but after that first blooding, the counter-offer advantage arises. Further,even with considerable hours of training, there seems little that takes theplace of experience.

Management Implications

The primary pragmatic implication is that experience matters. Manage-ment training of new negotiators must include some realistic negotiationpractice. Knowledge of negotiation strategies and tactics may be useful,but without the actual negotiation practice the novice appears to be at a dis-tinct disadvantage. The experience of a face-to-face zero-sum negotiationwith significant stakes may change the situation from a cerebral, detached,mildly interesting game to an intensely competitive, ego-challengingconfrontation.

Further study results indicate the first-mover advantage is not presentafter the first negotiation. Moreover, a counter-offer advantage may evenbe possible. This lends itself to the practice of making every effort toinspire the other party to make the first offer.

Limitations

Although often used in negotiation studies, student negotiators as thesource of information about first offers and counter offers is the main lim-itation of this study. Students in our sample had to obtain successful nego-tiation results to increase their grades, however; the level of motivation forthe students may not be the same as negotiators in business or life situations.In addition, the motivation of each student to obtain higher grades maynot be the same. Consequently, the findings could differ from negotiatorsin other situations.



The process involved in obtaining the student sample also may be alimitation. The negotiation course, in which the students constitute thesample, is a very popular course and not everyone who wants to take thecourse can get into the course. In addition to chance being an element toenrolling in the course, the course is an elective and only students with aninterest in negotiation may attempt to enroll in the course. Since they havean interest in negotiation, their motivations may be different from thegeneral population.

The format of the negotiations also limits general conclusions about nego-tiations. This study required the negotiators to participate in a zero-sumgame. In reality, not all negotiations are zero-sum games. In some actualnegotiation situations, negotiators could obtain results where both partiesin the negotiation win. Consequently, a cooperative spirit rather than acompetitive one may be the order. This type of atmosphere could create avery different type of negotiation behavior than the behavior experiencein a zero-sum game. Consequently, the application of these results tothose types of negotiations would not be appropriate.

The participants did not negotiate for a specific product in the study.The reason was to insure that no negotiator had a knowledge advantageover her opponent. However, this unrealistic situation does create problemsfor the application of the results. In fact, students who had professionalexperience prior to the class negotiations often remarked that negotiatingover no specified product with no general price information was far moredifficult than negotiating over a concrete product with a “ballpark guesti-mate” price knowledge as background.

Future Research

The purpose of this study was to examine the relative influence of firstoffer and counter offers in a competitive negotiation setting. The studyexamined the results of 1621 negotiations by students engaged in zero-sumgames with 50 percent of their course grade at stake.

Student negotiations may not be directly applicable to situations outsidethe classroom. Future negotiation studies could use a different populationbase for first offer and counter-offer research such as professional negotia-tors to see if the results reported by this study do apply to other situations.It would be useful to know if the first and counter offer results differ innegotiation situations where the negotiators are to cooperate to achieve“win-win” outcomes. Team negotiation could also change the dynamicsof the situation such that results could differ. Altering the structure of the



negotiations in areas such as imposing no time limit, providing product orprice information to the participants, or changing the stakes from gradesto money or other rewards could also change the results of the study.

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IMPLICATIONS FOR BUSINESS MARKETING PRACTICE

The overall objective of this paper is to compare the outcomes of nego-tiators in a zero-sum game situation who make the initial offer and thosewho make the counter offer. One hypothesis examined the overall resultswhile ten other hypotheses considered the results of the negotiations asparticipants gained increasing experience in negotiation. Results indicateda difference in the outcome of those placed in a position of making thefirst offer compared to those who made the counter offer without regardto subject negotiation experience. Overall, those making the initial offerhad significantly lower outcomes (48.35% of 100% possible) comparedto those making the counter offer (51.65%).

It was interesting to note that in the first negotiation alone, the partymaking the first offer earned a significantly higher average outcome(54.24%) than the party making the counter offer (45.76%). The averageoutcomes of the final nine negotiations showed the party making the firstoffer generated a lower outcome than the party making the counter offerin all nine cases, with five cases resulting in statistically significant differ-ences. This analysis lends little credence to the notion that the party makingthe first offer in a negotiation has an advantage. Perhaps there is a firstoffer advantage, but only when dealing with someone with no experience.Even with training, the subjects in this study apparently were swayed by thepower of the first offer during their first negotiation experience. However,after that first negotiation, the party who made the counter offer showed noeffects of laboring under the weight of the anchor. Much to the contrary,outcome results indicate those making the counter offer appeared to enjoythe advantage.

So, perhaps there is a first-offer advantage when dealing with a novice,but after that first blooding, the counter-offer advantage arises. Further,even with considerable hours of training, there seems little that takes theplace of experience.

The primary pragmatic implication is that experience is of considerableconsequence. Management training of new negotiators must includesubstantial realistic negotiation practice using business modes such asface-to-face, telephone communication or other mode. It would probablybe best to practice negotiations with a significant stake at risk to give thenovice a sense of a potential situation and help generate confidence inknowing what to seek and beware in the negotiation. Knowledge ofnegotiation strategies and tactics may be useful, but without the actual



negotiation practice the novice appears to be at a distinct disadvantage.The experience of a face-to-face zero-sum negotiation with significantstakes may change the situation from a cerebral, detached, mildly interestinggame to an intensely competitive, ego-challenging confrontation.

Further study results indicate the first-mover advantage is not presentafter the first negotiation. Moreover, a counter-offer advantage may evenbe possible. This lends itself to the practice of making every effort toinspire the other party to make the first offer.

Results should be tempered considering the study situations. Althoughoften used in negotiation studies, student negotiators as the source ofinformation about first offers and counter offers is the main limitation ofthis study. Students in our sample had to obtain successful negotiationresults to increase their grades; however, the level of motivation for thestudents may not be the same as negotiators in business or life situations.In addition, the motivation of each student to obtain higher grades maynot be the same. Consequently, the findings could differ from negotiatorsin other situations.

The format of the negotiations also limits general conclusions aboutnegotiations. This study required the negotiators to participate in a zero-sumgame. In reality, not all negotiations are zero-sum games. In some actualnegotiation situations, negotiators could obtain results where both partiesin the negotiation win. Consequently, a cooperative spirit rather than acompetitive one may be the order. This type of atmosphere could create avery different type of negotiation behavior than the behavior experiencein a zero-sum game. Consequently, the application of these results tothose types of negotiations would not be appropriate.

The participants did not negotiate for a specific product in the study.The reason was to insure that no negotiator had a knowledge advantageover her opponent. However, this unrealistic situation does create problemsfor the application of the results. In fact, students who had professionalexperience prior to the class negotiations often remarked that negotiatingover no specified product with no general price information was far moredifficult than negotiating over a concrete product with a “ballpark guestimate”price knowledge as background.


Documents

First-Offer Disadvantage in Zero-Sum Game Negotiation Outcomes