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Brain Circuits
Hold ’em, Texas: When not to make the first offer in negotiations
Generally, making the first offer in a negotiation gives you more control of the final outcome. But sometimes letting the other side show their cards first provides you with valuable information on their position. Here are three scenarios when you should hold back.
1. Lack of information.
When you have not educated yourself about the potential range of realistic possibilities, it likely pays to hear what the other side wants first. Besides, your first offer could be grossly inappropriate.
2. When there are both zero-sum and win-win issues at stake.
This is where it gets complicated. When the issue is a zero-sum game, meaning your gain is their loss, you should make the first offer. But when a compatible issue (i.e. a win-win scenario for both sides) is also in play, you should not reveal your preferences first. This is because the other side can disguise the preferences that are compatible with yours to seem incompatible, using this issue to get more of what they want on the zero-sum issue.
3. Unclear intentions.
If your counterpart has selfish competitive motives, they may try to take advantage of knowing your compatible preferences to ensure they benefit. In this scenario, let them show their hand first.
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Further reading:
Thinking Fast and Slow by Daniel Kahneman
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