BUSI 372 Week 3 Written Assignment 2 Example

The First Number Wins: Anchors, Price Knowledge and Fair Negotiation on the Sales Floor

Introduction

In most dealerships, the sale of a vehicle includes a negotiation over price, trade-in value, financing or all three. Sales training often treats negotiation as a contest of persistence. Research suggests it is shaped by something simpler: the first number put on the table and what each side appears to know. This paper examines those two forces and their fairness, and argues that dealerships should adopt transparent first offers and consistent pricing rules.

The Power of the First Number

Galinsky and Mussweiler (2001) ran negotiation experiments and found that the side making the first offer usually came out ahead, since that opening figure anchored the bargaining and drew the final deal toward it. The effect weakened when the other side deliberately focused on its own target or on the other party's alternatives. In a showroom, the first number might be the sticker price, the trade-in appraisal or a monthly payment. Each one sets the frame for everything that follows. A customer who hears a low trade-in figure first tends to bargain upward from it, rather than from the vehicle's market value, and a customer who hears a monthly payment first may never focus on the total price at all. In negotiation, the first number is not just a starting point; it is a gravitational field.

That knowledge can be used well or badly. A salesperson who opens with an inflated trade-in figure and then adds it back elsewhere is using the anchor to mislead. A dealer who opens with a fair, published price uses it to shorten the negotiation and build trust.

What the Customer Appears to Know

Price knowledge changes quotes. Busse et al. (2017) had callers request repair quotes from auto repair shops, varying whether the caller mentioned an expected price. When callers signaled no knowledge, women received higher quotes than men; when callers stated a fair expected price, the gender difference disappeared, and when they stated a high price, quotes rose for everyone. Women who asked for a lower price were also more likely than men to get it. The lesson for a dealership is that customers who appear uninformed may be charged more, which is both a reputational risk and an ethical problem, and that small differences in how a customer opens the conversation can change the outcome.

Fairness in Negotiated Prices

Older research found the same pattern in new car sales. Ayres (1991) sent testers trained to bargain identically to dealerships and found that Black and female testers received significantly higher price quotes than white men. Negotiation creates room for differences in treatment that customers cannot see and managers may not intend.

A Policy for a Dealership

Consider a composite dealership that wants to keep negotiation but reduce its risks. It could publish a market-based price for every vehicle online, make that price the first offer on the showroom floor, appraise trades with a written method shown to the customer, and limit how far a salesperson may move from the published price without a manager's documented approval. Managers could review a sample of deals each month to make sure similar customers are receiving similar prices.

Training Salespeople for Honest Negotiation

Policies work only if salespeople understand them. Training should explain anchoring openly, so salespeople know why the published price comes first and why inflating a trade-in figure to adjust it later damages trust. Role-plays can teach salespeople to discuss price confidently without pressure, for example by showing the market data behind a price rather than insisting it is the best deal available. Salespeople should also learn to slow down when a customer seems uncertain, asking what the customer has researched instead of treating uncertainty as an opening. Pay plans matter as well: a salesperson paid entirely on the gross profit of each deal has a constant incentive to push anchors upward, while a plan that rewards volume and customer satisfaction removes much of that pressure. Managers who review negotiated deals for consistency should share the results with the sales team, so fairness becomes a measured part of the job rather than an aspiration.

A Biblical Perspective

In the Sermon on the Mount, Jesus told his hearers to let their yes mean yes and their no mean no (English Standard Version Bible, 2001/2016, Matthew 5:37). A negotiation built on inflated anchors and hidden adjustments depends on words that do not mean what they appear to mean. A transparent first offer is a way of letting a price mean what it says.

Conclusion

Negotiation outcomes are shaped by the first number and by what each side knows. Dealers can use those forces to pressure customers or to serve them. Research and Scripture both point toward transparent first offers and consistent rules, which treat customers fairly and protect the dealership's reputation. A store that prices this way can say so openly, and that openness becomes part of what it sells.

References

Ayres, I. (1991). Fair driving: Gender and race discrimination in retail car negotiations. Harvard Law Review, 104(4), 817-872. https://doi.org/10.2307/1341506

Busse, M. R., Israeli, A., & Zettelmeyer, F. (2017). Repairing the damage: The effect of price knowledge and gender on auto repair price quotes. Journal of Marketing Research, 54(1), 75-95. https://doi.org/10.1509/jmr.13.0291

English Standard Version Bible. (2016). Crossway. (Original work published 2001)

Galinsky, A. D., & Mussweiler, T. (2001). First offers as anchors: The role of perspective-taking and negotiator focus. Journal of Personality and Social Psychology, 81(4), 657-669. https://doi.org/10.1037/0022-3514.81.4.657