IDEAS home Printed from
   My bibliography  Save this article

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


  • Yossi Maaravi
  • Asya Pazy
  • Yoav Ganzach


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.

Suggested Citation

  • Yossi Maaravi & Asya Pazy & Yoav Ganzach, 2011. "Pay as much as you can afford: Counterpart's ability to pay and first offers in negotiation," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 6(4), pages 275-282, June.
  • Handle: RePEc:jdm:journl:v:6:y:2011:i:4:p:275-282

    Download full text from publisher

    File URL:
    Download Restriction: no

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Shlomo Benartzi & Richard H. Thaler, 1995. "Myopic Loss Aversion and the Equity Premium Puzzle," The Quarterly Journal of Economics, Oxford University Press, vol. 110(1), pages 73-92.
    2. Tversky, Amos & Kahneman, Daniel, 1992. "Advances in Prospect Theory: Cumulative Representation of Uncertainty," Journal of Risk and Uncertainty, Springer, vol. 5(4), pages 297-323, October.
    3. Knetsch, Jack L, 1989. "The Endowment Effect and Evidence of Nonreversible Indifference Curves," American Economic Review, American Economic Association, vol. 79(5), pages 1277-1284, December.
    4. Amos Tversky & Daniel Kahneman, 1991. "Loss Aversion in Riskless Choice: A Reference-Dependent Model," The Quarterly Journal of Economics, Oxford University Press, vol. 106(4), pages 1039-1061.
    5. Kliger, Doron & Levit, Boris, 2009. "Evaluation periods and asset prices: Myopic loss aversion at the financial marketplace," Journal of Economic Behavior & Organization, Elsevier, vol. 71(2), pages 361-371, August.
    6. Schoemaker, Paul J H, 1982. "The Expected Utility Model: Its Variants, Purposes, Evidence and Limitations," Journal of Economic Literature, American Economic Association, vol. 20(2), pages 529-563, June.
    7. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-291, March.
    8. van Dijk, Eric & van Knippenberg, Daan, 1998. "Trading wine: On the endowment effect, loss aversion, and the comparability of consumer goods," Journal of Economic Psychology, Elsevier, vol. 19(4), pages 485-495, August.
    9. Arkes, Hal R. & Blumer, Catherine, 1985. "The psychology of sunk cost," Organizational Behavior and Human Decision Processes, Elsevier, vol. 35(1), pages 124-140, February.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Yossi Maaravi & Asya Pazy & Yoav Ganzach, 2014. "Winning a battle but losing the war: On the drawbacks of using the anchoring tactic in distributive negotiations," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 9(6), pages 548-557, November.
    2. Ricky S. Wong & Susan Howard, 2017. "Blinded by Power: Untangling Mixed Results Regarding Power and Efficiency in Negotiation," Group Decision and Negotiation, Springer, vol. 26(2), pages 215-245, March.

    More about this item


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


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:jdm:journl:v:6:y:2011:i:4:p:275-282. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jonathan Baron). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.