Harvard Business Essentials, Decision Making

Anchoring and Adjustment

Negotiation experts use the term anchoring to refer to a tactic that at-

tempts to establish an initial position around which negotiations will

take place. In the right circumstances, the first person to put a price

on the table establishes a psychological anchor point around which

subsequent discussion and counteroffers generally revolve.

For example, suppose you list your house for sale for $500,000.

Most interested buyers will respond to that price. “We’ll offer

$475,000,” says one. Another says, “I’ll offer $470,000 if the seller will

first repair the water damage in the cellar.” Studies have shown that the

outcomes of negotiations ...