Determinants of a negotiator's initial opening offer

Although the initial offer is a crucial aspect in the process of most negotiations, there is still a complete lack of empirical evidence on what underpins initial offer decisions. For this reason, the effects of different reference points on the negotiator's initial offer were examined in this study. Results from a sample of 596 managers indicate that knowledge of the opponent's best available alternative, or (Best Alternative To a Negotiated Agreement BATNA), is by far the strongest determinant. Criteria of fairness, as reflected in an estimated market price, are also important. However, awareness of the dependency of the other party has no direct effect on the initial offer. Apparently, negotiators define the negotiation game as the management of interdependency in an extremely egocentric way and base their opening offers largely on cues regarding the power structure within the dyad.