Extreme opening is a key tactic in a negotiation. This bold approach consists of presenting an initial offer or question that seems outrageous and pushes the boundaries of what is reasonable. Although it feels like risky, the reasoning behind extreme opening is deeply rooted in psychology.
The psychology
Extreme opening in a negotiation is rooted in the principle of anchoring, a cognitive bias in which individuals rely heavily on the first information they receive when making decisions. By putting an extreme first offer or question on the table, negotiators create a high anchor point that influences subsequent discussions. Even if the extreme offer is rejected, it adjusts perceptions about the range of acceptable outcomes, making subsequent concessions seem more reasonable.
These concessions create with the other party a high level of satisfaction so they will be happy with the outcome of the negotiation (irrespective the final result...). And given  your extreme opening, you will have loads of room to concede...and to create satisfaction.
In addition, an extreme opening can function as a strategic filter, to distinguish serious adversaries from those unwilling to participate meaningfully. Parties who respond negatively or dismissively to the extreme offer may thereby reveal their unwillingness to negotiate sincerely or their inflexibility. Identifying such counterparties early can save time and resources by focusing efforts on more promising opportunities.
The Research: Analyzing the Impact of Extreme Opening Offers in NegotiationsÂ
The Significance of Initial Offers
Extensive research underscores the pivotal role of the first offer in negotiations. White et al. (1994) established that this initial figure acts as a critical benchmark, shaping the trajectory and final outcomes of negotiations. The practice of presenting a notably high or low offer at the outset, particularly in distributive bargaining scenarios, is thus of paramount importance.
The Influence of Culture on Opening Offers
The question arises: is the tendency to commence negotiations with a bold offer influenced by cultural norms? Gunia et al. (2013) found that the strategic use of such extreme offers and the anchoring effect they produce are consistent across various cultures, power dynamics, and negotiation contexts. However, what constitutes an "extreme" offer varies significantly from one culture to another. For example, a negotiation approach that is deemed acceptable in China may be considered overly aggressive in Finland, potentially undermining the negotiator's credibility.
The Role of Information Asymmetry
Liebert et al. (1968) concluded that disparities in information between negotiating parties enhance the effectiveness of the first offer and justify more aggressive opening positions. Conversely, in situations where information is easily accessible to both parties, making an excessively ambitious opening offer is generally discouraged. It is essential, therefore, to carefully evaluate the information available to each party before initiating negotiations.
The Effect on Relationships
Maaravi et al. (2014) discovered that when one party employs an extreme opening offer, it not only influences the immediate negotiation outcome but can also damage future relational dynamics. This is because the party that made the extreme offer often secures a more favorable deal at the cost of the ongoing relationship, reducing the other party's willingness to engage in future negotiations.
Counteracting Extreme Offers
Recent findings by Lipp et al. (2023) suggest that responding to an extreme opening with a similarly bold counteroffer can mitigate the initial offer's impact. However, this strategy increases the likelihood of failing to reach an agreement, especially if the gap between the offers—the "anchoring zone"—is substantial.
Adaptation to Negotiation Types
The strategy of making an extreme initial offer is particularly relevant in competitive, or distributive, negotiations, as outlined by Raiffa (1982). In contrast, collaborative negotiations allow for a more nuanced approach, where the negotiator may consider various factors and occasions for making an opening offer. Although it might be tempting to start with high demands across all negotiation aspects, such a tactic is generally ill-advised.
In sum, while extreme opening offers can serve as a powerful tool in negotiations, their effectiveness and appropriateness are contingent upon cultural norms, information availability, relationship dynamics, and the nature of the negotiation itself.
Extreme opening in real life- A Hollywood tale
Dwayne Johnson, one of Hollywood's highest-paid actors, made headlines in 2018 for his extreme opening move during negotiations with Universal Pictures for his role in "Red Notice." Johnson reportedly demanded a staggering $22 million upfront salary, making it one of the highest paychecks for an actor in recent memory. Additionally, he negotiated for extensive creative control over the project and significant input into casting decisions.
extreme opening move served several purposes. Firstly, it demonstrated his value and drawing power as a bankable star, particularly in the action-adventure genre. Secondly, it set a high anchor point for negotiations, signaling to Universal Pictures that he was serious about his demands and willing to walk away from the project if his terms were not met. Finally, it positioned Johnson as a key player in shaping the film's direction and ensured that his vision for the project would be respected.
Despite the initial shock of Johnson's demands, negotiations between the actor and Universal Pictures ultimately led to a mutually beneficial agreement. Universal Pictures recognized the commercial appeal of casting Johnson in a high-profile action film and agreed to his salary demands and creative input. The final contract not only secured Johnson's participation in "Red Notice" but also ensured that he played a central role in the film's development and marketing.
Johnson's extreme opening move in negotiations for "Red Notice" highlighted his status as a leading actor in Hollywood and reinforced his reputation as a savvy businessman. By advocating for his interests and negotiating from a position of strength, Johnson secured a lucrative deal that reflected his value to the project and allowed him to contribute creatively to its success. The outcome demonstrated the power of negotiation and strategic positioning in achieving mutually beneficial agreements in the entertainment industry.
Conclusion
The strategy of starting negotiations with very high demands, known as extreme opening, is a powerful method that works because it plays on psychological tactics like anchoring, and it works across different cultures and situations. It's effective but complex, requiring deep knowledge of the negotiation environment, such as cultural norms and the information both parties have.
Applying this strategy wisely is key. It can set a high starting point that benefits the person who uses it, but it must be handled carefully to avoid harming long-term relationships. Dwayne Johnson's negotiations with Universal Pictures show how a bold approach, when well-informed, can lead to significant negotiation results. This underscores the importance of opening extreme in negotiations, just be mindful of the negotiation approach you are pursuing, as extreme openings are more applicable to competitive negotiation approaches.
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References:
Gunia BC, Swaab RI, Sivanathan N et al (2013) The remarkable robustness of the first-offer effect: across culture, power, and issues. Pers Soc Psychol B 39(12):1547–1558. https://doi.org/10.1177/01461 67213499236
Liebert RM, Smith WP, Hill J et al (1968) The effects of information and magnitude of initial offer on interpersonal negotiation. J Exp Soc Psychol 4(4):431–441. https://doi.org/10.1016/0022- 1031(68)90068-1
Lipp W, Smolinski R, Kesting P (2023) Beyond the first offer: Decoding Negotiation openings and their impact on economic and subjective outcomes. https://doi.org/10.1007/s10726-023-09813-5
Maaravi Y, Pazy A, Ganzach Y (2014) Winning a battle but losing the war: on the drawbacks of using the anchoring tactic in distributive negotiations. Judgm Decis Mak 9(6):548–557. https://doi.org/ 10.1509/jmkr.48.SPL.S38
Raiffa H (1982) The art and science of negotiation. Harvard University Press, Cambridge
White SB, Valley KL, Bazerman MH et al (1994) Alternative models of price behavior in dyadic negotiations: market prices, reservation prices, and negotiator aspirations. Organ Behav Hum Decis Process 57(3):430–447. https://doi.org/10.1006/obhd.1994.1023
