Should you make the first offer in a negotiation?

Often yes, if you know what the thing is worth. Studies suggest that negotiators who make the first offer frequently achieve economically more advantageous results, because the first number sets an anchor, a starting point that the rest of the haggling circles around. As soon as one side states a first price, the anchor is set, and the other side's counterbid becomes the second anchor.

The anchoring effect, which you may know from random numbers swaying guesses, is especially powerful here. Negotiators can judge an offer on several features, yet studies show they tend to focus on only one. A deliberate starting point can therefore strongly affect the range of counteroffers. Multiple studies have shown that initial offers have a stronger influence on the outcome than later counteroffers. Anchoring shows up in real life in salary negotiations, consumer purchases and even legal sentencing.

But going first has a price. If you do not know enough, you can set your first anchor too low, against your own interests. The party who sets the second anchor has an advantage of its own, because the counter-anchor determines the point midway between both anchors. And, curiously, those who set the first anchor tend to be less satisfied with the outcome, perhaps from the regret of not having squeezed out the full potential.

So a sensible rule is to go first when you have done your homework, and to treat the other side's first number as a starting point to test, not as the truth.