Explain what anchoring is and why the first offer carries so much weight.
You walk into an electronics shop in Funan to look at a laptop. The tag shows S$2,199 crossed out with S$1,699 underneath (both example prices), and before you have checked what other shops charge, or whether anyone ever paid S$2,199, you are already thinking of S$1,699 as a deal.
The first number shaped your judgement before any checking happened. The sections below explain how that effect works. The next four lessons in this module show how to use it and how to stop it being used against you.
In 1974 two psychologists, Amos Tversky and Daniel Kahneman, published a paper on the mental shortcuts people use when they make judgements under uncertainty. They called one of those shortcuts anchoring. When people estimate a quantity, they tend to start from whatever number is in front of them and adjust away from it. The adjustment is usually too small, so the final estimate stays close to where it started.
The starting number does not have to be relevant. In one of their experiments, a number produced by something like a spinning wheel, clearly unrelated to the question being asked, still pulled people's estimates towards it. People given a higher random number gave higher answers to a factual question than people given a lower one.
The starting number is the anchor. Once it is set, you judge everything else by its distance from it. In the Funan shop, S$1,699 feels cheap because it sits S$500 below S$2,199. Nothing you know about laptops has gone into that feeling.
Negotiations are full of uncertainty about value. What is this role worth? What should this flat rent for? What is a fair fee for eight videos a month? When nobody knows the answer for sure, the first credible number put on the table often becomes the reference point for everything said after it.
Take Wei Ling, whose offer call you followed in module 2 (the salary figures here are examples). If the recruiter opens at S$5,200, the conversation centres on S$5,200: will they go to S$5,400, S$5,500? If Wei Ling opens at S$6,200, the conversation centres on S$6,200: will she accept S$6,000, S$5,900? The range being discussed, and often the place where the deal lands, moves depending on who speaks first and what number they give.
So the first offer carries more weight than it appears to, because it frames the rest of the discussion. Whether it pays you to go first is covered in the next lesson.
Experience does not switch anchoring off. In 1987 Gregory Northcraft and Margaret Neale gave estate agents the same house to value. The information sheet each agent received showed a different listing price. The listing price shifted the agents' valuations, and most of the agents did not name the listing price among the things they had relied on.
The point is not that experts are foolish. Knowing the market is a defence, but only a partial one. If you have done the research in lesson 3.1, "Research the market and the other side", you will be pulled less than someone who has not, and you will still be pulled. That is one more reason to collect your own data before a negotiation, so your own reference points sit next to the other side's.
Knowing about anchoring does not make you immune either. Having read all of this, you would still be pulled tomorrow by a salary or a rent someone named to you, because the effect works below the level of deliberate thought.
The protection is a habit you carry out before you hear the other side's number. You did a version of it in module 2 and in lesson 3.3. Write down three figures, each with its reason:
your reservation point, the line where you walk away your target, the outcome you are aiming for your opening, the number you would put forward first
When their number arrives, compare it with what is written down instead of with what feels reasonable in the moment, and respond based on that comparison.
Wei Ling now keeps a note on her phone: target S$6,200 and reservation S$5,500, with a sentence of reasoning under each. If the recruiter says S$5,200, she does not think in terms of S$5,200 plus a little. She sees that the offer is S$300 below her walk-away line and S$1,000 below her target, and she responds from there.
Most people can recall an anchor that worked on them: a sale tag, a car dealer's first price, or a salary someone mentioned before they had thought about their own number. The activity asks you to bring one of those moments back and look at how it shaped what you accepted.
Think of a purchase or negotiation where the first number you heard shaped what you accepted. Write down how it affected you.
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