Study: Quoting a high price has a big payoff

If you tend to stew over quoting a high price for your offering out of fear that you’ll blow the deal, there’s new research on price negotiation that should set your mind at ease.

Thanks to what psychologists call “the anchoring effect,” quoting a high price first will work to your advantage. Even when it’s extreme, a high price will usually yield an end result higher than if you quote a lower one you think might be more acceptable.

University of Idaho researchers conducted experiments around salary negotiations that prove the point. Participants in one group were presented with an applicant asking outright for $100,000, while the same candidate asked a control group for a number based on a prior salary of $29,000.

Participants who were given the high anchor awarded the applicant a higher salary. In a second experiment the high anchor was even more extreme – $1 million – with the same end result.

Source: Todd Thorsteinson in The Journal of Applied Social Psychology