To Bid or Not to Bid? That is the Question! First‐ Versus Second‐Mover Advantage in Negotiations

Abstract

For the past two decades, negotiation research has established a first‐mover advantage based on the anchoring and adjustment heuristic. Negotiation scholars have argued that first offers serve as anchors that affect both counteroffers and settlement prices. Consequently, management education—including negotiation articles, books, courses, and seminars—often recommends that negotiators move first to “anchor” their counterparts. Nonetheless, a growing body of recent research contradicts this general advice and points to a second‐mover advantage in specific cases. Interestingly, this contradiction was termed the “practitioner‐researcher paradox,” as practitioners and negotiation experts appeared to understand the benefits of moving second in negotiations, which scholars—up until recently—generally have overlooked. The current article offers a solution to this paradox by proposing three key factors that might explain the conditions and circumstances of first‐ versus second‐mover advantage in negotiations. These three factors are central in negotiation research and practice: information, power, and strategy. Given the centrality of first offers in negotiations, the solution to this paradox is crucial for negotiation scholars, businesspeople, managers, and anyone else who finds themselves in a negotiation.