But I don't think that this amounts to much.

Recall, that anchors are in play when the underlying distribution of events in either not known or only dimly guessed at. Anchoring works as an effect when there is uncertainty.

In the experiments, too many real life details are left out and the participants are left with an excessive amount of underlying uncertainty about the range of possible value.

In the experiments, it doesn't surprise me that the particpants react to the uncertainty just as anchoring predicts.

And while I do think that there are real life examples of anchoring, having to do with earnings or revenue claims, in legal bargaining large claims have to be backed up with either evidence, legal skill or a combination of both.

The real reason not to make a first offer is that you need to find out what the conflict is about before you can make a serious offer that will be entertained by the other side.

This brings me to my next observation: cooridnated solutions versus nash equilbrium plays.

My own small area of specfic talent is diagnosing those conflicts in which one of the two strategies creating value (coordination strategies) or claiming value (nash equilibrium) stands out, wrongly, as the only strategy. This illusion persists often even for experienced bargainers. {You might ask, why I don't see the illusion.)

Here is a simple example, which I wrote about, here: http://www.bizop.ca/blog2/how-would-you-play-that/shubiks_dollar.html

In the dollar auction game, the strategy of claiming value - by being the high bidder - completely overwhelms the creating value strategy - how we can both share in buying a $20 bill for less than $20.

But even once individuals see that it is in their interest to coordinate, one person stops bidding and both share the proceeds, it is not obvious how the group can credibly commit to the sharing strategy. (My solution calls for one person to ask for money to stop bidding.)

There are many examples of these strategic illusions -which I am currently categorizing to turn into a publication.

But all of the examples have to do with the illusion that the point of the game or conflict is only to claim value -which generally leads to suboptimal bargaining.

My own view, which is generally not shared by the academic or practical world, is that these strategic illusions about what the point of the game are the most important ones to solve. (But may I am wrong and I just like illusions that I can unravel?)

It is a sophisticated and real life example of how a) thinking about the cooridinated solution, and b) figuring out a credible commitment on your part which will force the other party to do their part leads to an optimal decision -trumping, in this case, the chancy IP trial.

My wife negotiates for a living and will readily attest to the real world benefit of anchoring and making the first offer. She is a music supervisor. Movie and TV producers retain her to negotiate and acquire the rights to use commercial music in audio/visual productions. In her business, there is no generally accepted cost structure for these compositions. While the amounts that are agreed upon for these rights are based loosely on past experience (with similar pieces of music and even the same piece of music), it is truly a free market where the price of the commodity (a song) is determined by what a buyer is willing to pay and a seller is willing to accept.

Despite the fact that she is the "buyer" in the deal, it is her practice to always include an offer in her initial contact with the "seller." She finds that this allows her to control the negotiation to a certain extent. Over the years she and her business partner have learned that unless you indicate to the seller the amount you are willing to pay, they will make irrational demands.

Sometimes, she avoids negotiation altogether by making the first offer. For example, she licensed a song that went to #2 on the charts and was on the charts for 20+ weeks. Based on prior experience with similarly popular songs, she expected the song to cost $6000 per week for the type of use needed (and had advised her clients as much). She initially offered $3000 per week, and the parties accepted the deal without modification.

More often then not, there is significant negotiation involved. She is currently working on a deal to procure the rights to a song off of an album by a Grammy nominated, platinum selling artist. The song is less well-known, but the album reached #2 on the charts. She advised her client that the project would cost between $90,000 and $95,000 and made an initial offer of $52,000. The copyright holder countered with $104,000. The deal is still in progress, but she expects to close the deal somewhere around $80,000 - less then expected.

She has also dealt with rights holders who have an irrational opinion of the value of their music and anchoring does not work. She recently had a deal fall apart when a rock band with a moderate following on the college and alternative charts refused to even negotiate. Based on the chart-success and apparent popularity of the song the client wanted, she believed the project would settle somewhere around $7000. When she offered the band $5000, they responded with a quote of $11,000. She then raised her offer to $6,000, but the band refused to move and the deal fell apart. Unbeknownst to the band, they are now on her blacklist and she will advise clients against using them at all in the future.

In short, she firmly believes that anchoring works.

For example, Chris's wife is dealing with parties who don't have her objective data about the value of the song. She can credibly use anchoring.

Geoff may be describing anchoring or framing. I don't know. But in a mediation just over money, we should reach a bargaining impasse where we do need a focal point to coordinate around. Geoff may be describing this also. Again, I don't know.

I know I am being a pest about definitions, but it is important to keep different conceptions just that - different.

Therefore, the first offer anchors the parties around certain criteria rather than other criteria. Chris' wife is effective, not because the parties with whom she is negotiating have no clue about the worth of their songs, but rather because there are so many different ways of valuing their songs that she anchors them around her preferred criteria.

In terms of the first offer being aggressive, I would caution on makin the offer too aggressive. For anchoring to work to your benefit, clearly the offer should be reaching or optimistic. At the same time, the offer should be justifiable (in some way linked to some objective criteria) so that the other party uses the anchor as their base rather than throwing it out completely.

"Recent research by Adam Galinsky and J. Keith Murnighan, professors in the Management and Organizations Department of the Kellogg School of Management, and Gillian Ku of London Business School turns tradition on end. In a paper published in the Journal of Personality and Social Psychology, the researchers show that low rather than high opening bids—for a variety of products from shirts to fancy rugs in online auctions—generate high selling prices, demonstrating a reversal of the anchoring effect."

Read it here:

http://insight.kellogg.northwestern.edu/index.php/Kellogg/article/place_your_bids

Keith Murnighan, one of the authors, is a pretty bright guy, in my opinion. Maybe that is because I consistently like his stuff!