Adoption of cognitive reference points in negotiations
Two experiments examined whether an initial offer, an estimated market price, or a reservation price (the highest or lowest acceptable price) is adopted as cognitive reference point in a price negotiation. In different conditions of these experiments, a total of 160 undergraduate students of psychology and business administration rated their satisfaction with proposed selling prices and likelihood they would buy or sell. Experiment 1 showed that in both the roles of buyers and sellers, subjects adopted as reference point an initial offer. However, the adoption of reference point was also affected by an estimated market price although not by the reservation price. In Experiment 2 using another operationalization, it was shown that the reservation price was adopted as reference point although an influence of an initial offer was also observed. The results may be consistent with the previous findings showing that the reservation price is a dominant reference point if it is assumed that the reservation price changes depending on information provided.