My friend John is part of a team that spent three months in negotiations over the acquisition of Company XYZ. He told me that the acquisition price, to which both parties agreed ($36 million) was not too far off from the initial price proposed by the seller ($36.8 million). Based on these numbers, I told him that I would not be surprised if the buyer was unconsciously influenced by:

Question

My friend John is part of a team that spent three months in negotiations over the acquisition of Company XYZ. He told me that the acquisition price, to which both parties agreed ($36 million) was not too far off from the initial price proposed by the seller ($36.8 million).  Based on these numbers, I told him that I would not be surprised if the buyer was unconsciously influenced by:

BlackTom AI · Accepted Answer

The scenario presents a situation in which the buyer’s eventual price ($36 million) is very close to the seller’s initial ask ($36.8 million), suggesting influence from an anchoring effect where an initial reference point unduly shapes subsequent judgments.
Option 1: Confirmation bias. This would involve favoring information that supports preexisting beliefs or hypotheses. In this scenario, there isn’t evidence that the buyer is selectively seeking or interpreting information to confirm a belief; the emphasis is on how the initial price may have anchored the negotiation.
Option 2: Anchoring bias. This is the idea that an initial piece of information (the anchor, here $36.8 million) disproportionately anchors subsequent judgments and adjustments, leading to a final outcome near that anchor (the $36 million agreed price). The described numbers fit this pattern precisely.
Option 3: Representativeness heuristic. This heuristic would lead someone to judge likelihoods based on similarity or resemblance to a prototype. It doesn’t directly explain why the final price hugs the initial ask in this negotiation context.
Option 4: Availability heuristic. This would involve relying on information that is most readily recalled from memory, such as recent headlines or vivid examples. There’s no indication that recall of readily available examples determined the negotiation price here.
Option 5: Overconfidence bias. This bias involves excessive belief in one’s own abilities or forecasts. While it could play a role in negotiations generally, it does not specifically account for the final price clustering around the initial anchor in the way anchoring does.

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