On the first-offer dilemma in bargaining and negotiations (Q2202230)

This article debates the eternally current topic related to the first proposal in negotiations, in the sense -- should the first offer be made or should the opponent wait to do so. Contrary to the prevailing opinion that the first move in negotiation is a mistake, the author reveals (theoretically) the following two different strategic behaviors: \begin{itemize} \item[(i)] If there is a strong belief that the second-mover is of the high-type, the first-mover proposes soft offers. In this case, there is no delay and no destruction of value, but the first-mover may incur an information cost and the second-mover benefits from an information gain. Consequently, second-mover advantages exist if the information advantage is sufficiently strong, which increases with the difference between the types; \item[(ii)] Otherwise, if there is no strong belief that the second-mover is of the high type, the first-mover proposes aggressive offers. However, these offers can be rejected by the high-type second-movers, and consequently lead to a cost of delay. In this case, the second-mover position is preferred if the first-mover cost of delay is sufficiently important. \end{itemize} The reader can find interesting considerations related to the characterization of market equilibrium and the existence of first- and second-mover advantages in bargaining.