Negotiation: Should You Make the First Move?
After successfully mediating several thousand disputes, I’ve found there is some evidence that making the first move can be advantageous. In many negotiations, the party who makes the first offer is able to set or “anchor” a favorable upper settlement range. Beneficial anchoring is only likely, however, if the first settlement proposal has a plausible rationale. If the initial settlement figure is patently absurd, the response almost certainly will be an equally unrealistic counter proposal. The parties are then likely to spend a great deal of time posturing before getting serious.
When negotiating with insurers, some plaintiffs’ personal injury attorneys find it advantageous to let the insurer make the first move. However, insurers generally anticipate a settlement demand from the plaintiff. Once received, the insurer proceeds to adjust the claim in a formulaic manner. However, if the insurer doesn’t receive a demand with or soon after notice of a claim, its internal claims handling methods can short circuit. The result? The insurer makes the first move in negotiation. Some plaintiffs’ attorneys will not respond to the insurer’s first or even second move. And by delaying a counter offer, they have achieved considerably higher settlements.
Whether to make the first move in a negotiation always depends upon the nature of the dispute, and, of course, the psychology and risk tolerance of the parties.
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