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Pay as much as you can afford: Counterpart's ability to pay and first offers in negotiation

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  • Yossi Maaravi
  • Asya Pazy
  • Yoav Ganzach
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    Abstract

    Three experiments investigated the relations between buyers' wealth or ability to pay (ATP) and sellers' first offers. Study 1 demonstrated a positive correlation between sellers' first offers and their perceptions of the buyer's ATP as well as its real economic power (indicated by the company's market value). In Study 2, sellers in a field experiment made higher offers to potential buyers of higher ATP. Study 3 examined the relations between buyer's ATP, the perception of its ability to obtain alternatives to a specific deal, and sellers' first offers. We found a positive correlation between sellers' perception of buyers' ATP, real ATP (as indicated by market value), and sellers' perception of buyers' availability of alternatives. As in Study 1, here too, the unit of analysis was the behavior of the individual participant. However, when sellers were primed to concentrate on buyers' alternatives, their first offers were negatively related to perceived buyer's alternatives.

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    Bibliographic Info

    Article provided by Society for Judgment and Decision Making in its journal Judgment and Decision Making.

    Volume (Year): 6 (2011)
    Issue (Month): 4 (June)
    Pages: 275-282

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    Handle: RePEc:jdm:journl:v:6:y:2011:i:4:p:275-282

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    Related research

    Keywords: negotiation; first offers; power; alternatives; BATNA.;

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