Anchoring Effect in Negotiation

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METHOD

PARTICIPANTS AND DESIGN

The participants in this experiment are twenty-four (24) people who are engineering workers by profession. They are separated into two groups of twelve people. There are equal numbers of male and female in each group. The design is 2 (who made the first offer, buyer versus seller) *2 (whether negotiator would consider opponents alternative) between subjects factorial design. The independent variable is the prices and condition of a engineering plant. The dependent variables are the participant’s offer, counteroffer and final agreement.

MATERIELS AND PROCEDURE

The way in which this experiment would be conducted would be: one group would pose as the buyer and the other as the sellers who will be involving in the negotiation of an engineering plane. Both of the groups would be given the same information. The information states that it was bought four years ago at a price of 10 million that is now below market value. It was valued at 15 million a year ago but since then real estate has declined. A new plant would cost 20 million and if anybody get the current engineering plant, it would make 13 million in profit which is close to the 10 million and 15 million. Either of the group can make the first offer.

Participants would be asked to give counteroffers when selling prices are stated. Counteroffers would depend on the price given. They would also be asked if it is high or lower than the anchor point. Reference point would be given depending on the highest acceptable price the buyer is willing to pay (reservation price).

Participants will be allowed to ask questions before hand and thanked after the research for their participation.

RESULTS

The results would be based on who made the first offers, whether it is the buyer or seller. Its will be also be based on the counteroffers generated from the given prices and reference point that are influenced by the reservation price of the buyer and the final outcome of the negotiation agreement.

The results of those mentioned above would be calculated using statistical technique to determined whether the results are significant to this research

DISCUSSION

After getting the results of this research we will then discuss them in detail. If the outcomes are as predicted we will carry on to extend our study on the effect of anchoring in negotiation. We will also discuss the results compared to previous research, the limitations and recommendations on how future research can improve on this. Lastly, we would conclude the results and importance of this research.

REFERENCES

Bazerman, H. M., & Neale, A. M (1994). Negotiating Rationally. Macmillan Inc. New York, Maxwell Macmillan, Toronto, Canada.

Galinsky. D. A., & Mussweiler. T. (2001). First offers as Anchors: The role of Perspective-Taking and Negotiator Focus. Journal of Personality and Social Psychology, 4, 657-669

Kristensen. H. & Garling T. (2000) Anchor Points, Reference Points, and Counteroffers in Negotiations. Group Decisions and Negotiations, 9, 493-505.

Whyte. G & Sebenius. K. J., (1997) The Effect of Multiple Anchors on Anchoring in Individual and Group Judgment. Organizational Behavior and Human Decision Processes, 69,75-85.