Editing Anchoring effect (section)

=== Anchoring in negotiation ===
In the negotiation process anchoring serves to determine an accepted starting point for the subsequent negotiations. As soon as one side states their first price offer, the (subjective) anchor is set. The counterbid (counter-anchor) is the second-anchor.<ref name="JungKrebs2019">{{Cite book | url=https://books.google.com/books?id=A46dDwAAQBAJ&pg=PA28 |title = The Essentials of Contract Negotiation|isbn = 9783030128661|last1 = Jung|first1 = Stefanie|last2 = Krebs|first2 = Peter|date = 2019|pages=28–29| publisher=Springer }}</ref>

In addition to the initial research conducted by Tversky and Kahneman, multiple other studies have shown that anchoring can greatly influence the estimated value of an object.<ref>{{Cite journal |ssrn = 900152|hdl=1811/77238|title = Anchoring, Information, Expertise, and Negotiation: New Insights from Meta-Analysis|date = 2006|journal=Ohio State Journal on Dispute Resolution|last1 = Orr|first1 = Dan|last2 = Guthrie|first2 = Chris|pages=597–628|volume=21|issue=3}}</ref> For instance, although negotiators can generally appraise an offer based on multiple characteristics, studies have shown that they tend to focus on only one aspect. In this way, a deliberate starting point can strongly affect the range of possible counteroffers.<ref name="TverskyKahneman1992">{{cite journal|last1=Tversky|first1=Amos|last2=Kahneman|first2=Daniel|title=Advances in prospect theory: Cumulative representation of uncertainty|journal=Journal of Risk and Uncertainty|volume=5|issue=4|year=1992|pages=297–323|doi=10.1007/BF00122574|s2cid=8456150}}</ref> The process of offer and counteroffer results in a mutually beneficial arrangement. However, multiple studies have shown that initial offers have a stronger influence on the outcome of negotiations than subsequent counteroffers.<ref name="KristensenGärling1997">{{cite journal|last1=Kristensen|first1=Henrik|last2=Gärling|first2=Tommy|title=The Effects of Anchor Points and Reference Points on Negotiation Process and Outcome|journal=Organizational Behavior and Human Decision Processes|volume=71|issue=1|year=1997|pages=85–94|doi=10.1006/obhd.1997.2713}}</ref>

An example of the power of anchoring has been conducted during the Strategic Negotiation Process Workshops. During the workshop, a group of participants is divided into two sections: buyers and sellers. Each side receives identical information about the other party before going into a one-on-one negotiation. Following this exercise, both sides debrief about their experiences. The results show that where the participants anchor the negotiation had a significant effect on their success.<ref name="Dietmeyer2004">{{cite book|last=Dietmeyer|first=Brian|title=Strategic Negotiation: A Breakthrough Four-Step Process for Effective Business Negotiation|url=https://books.google.com/books?id=NcsUvgAACAAJ|year=2004|publisher=Kaplan Publishing|isbn=978-0-7931-8304-3}}</ref>{{page needed|date=November 2014}}

Anchoring affects everyone, even people who are highly knowledgeable in a field. Northcraft and Neale conducted a study to measure the difference in the estimated value of a house between students and real-estate agents. In this experiment, both groups were shown a house and then given different listing prices. After making their offer, each group was then asked to discuss what factors influenced their decisions. In the follow-up interviews, the real-estate agents denied being influenced by the initial price, but the results showed that both groups were equally influenced by that anchor.<ref name="NorthcraftNeale1987">{{cite journal|author1-link=Gregory Northcraft|author2-link=Margaret Ann Neale|last1=Northcraft|first1=Gregory B|last2=Neale|first2=Margaret A|title=Experts, amateurs, and real estate: An anchoring-and-adjustment perspective on property pricing decisions|journal=Organizational Behavior and Human Decision Processes|volume=39|issue=1|year=1987|pages=84–97 |doi=10.1016/0749-5978(87)90046-X}}</ref>

Anchoring can have more subtle effects on negotiations as well. Janiszewski and Uy investigated the effects of precision of an anchor. Participants read an initial price for a beach house, then gave the price they thought it was worth. They received either a general, seemingly nonspecific anchor (e.g., $800,000) or a more precise and specific anchor (e.g., $799,800). Participants with a general anchor adjusted their estimate more than those given a precise anchor ($751,867 vs $784,671). The authors propose that this effect comes from difference in scale; in other words, the anchor affects not only the starting ''value'', but also the starting ''scale''. When given a general anchor of $20, people will adjust in large increments ($19, $21, etc.), but when given a more specific anchor like $19.85, people will adjust on a lower scale ($19.75, $19.95, etc.).<ref name="JaniszewskiUy2008">{{cite journal|last1=Janiszewski |first1=Chris| last2=Uy|first2=Dan| title=Precision of the Anchor Influences the Amount of Adjustment|journal=Psychological Science |volume=19|issue=2|year=2008|pages=121–127| doi=10.1111/j.1467-9280.2008.02057.x| pmid=18271859|s2cid=30354971}}</ref> Thus, a more specific initial price will tend to result in a final price closer to the initial one.

As for the question of setting the first or second anchor, the party setting the second anchor has the advantage in that the counter-anchor determines the point midway between both anchors.<ref name=JungKrebs2019/> Due to a possible lack of knowledge the party setting the first anchor can also set it too low, i.e. against their own interests. Generally negotiators who set the first anchor also tend to be less satisfied with the negotiation outcome, than negotiators who set the counter-anchor.<ref>{{Cite journal | doi=10.1007/s10726-013-9348-4 |title = Good Grief! Anxiety Sours the Economic Benefits of First Offers|journal = Group Decision and Negotiation|volume = 23|issue = 3|pages = 629–647|year = 2014|last1 = Rosette|author-link = Ashleigh Shelby Rosette|first1 = Ashleigh Shelby|last2 = Kopelman|first2 = Shirli|last3 = Abbott|first3 = Jeanna Lanza|s2cid = 145810782|url=https://www.researchgate.net/publication/257567785}}</ref> This may be due to the regret or sense that they did not achieve or rather maximise the full potential of the negotiations. However, studies suggest that negotiators who set the first offer frequently achieve economically more advantageous results.<ref>{{Cite journal | doi=10.1037/0022-3514.81.4.657 |title = First offers as anchors: The role of perspective-taking and negotiator focus|journal = Journal of Personality and Social Psychology|volume = 81|issue = 4|pages = 657–669|year = 2001|last1 = Galinsky|first1 = Adam D.|last2 = Mussweiler|first2 = Thomas|s2cid = 8057886|pmid=11642352}}</ref>