Abstract: This paper aims to examine the impact of negotiators’ first offers on negotiation impasse as well as the moderating effect of negotiating roles.
Even though first offers can have significant effects on the process and outcome of negotiations, this topic has been largely overlooked in existing literature on negotiation impasse. Two studies were conducted to investigate the relationship between first offers and negotiation impasse. In Study 1, we predicted that extreme first offers can lead to impasse in that such offers might narrow the possible negotiation zone and elicit competitive behaviors from the counterparts. Study 2 focuses on whether negotiating parties with different powers can moderate the relationship between the first offers and the negotiation impasse. Since negotiation situations are characterized by uncertainty and information asymmetry, the negotiating parties will rely on schema or heuristics to predict and judge their opponent’s behaviors. For negotiators with less power, making an extreme offer could violate the schema or the other party’s expectations toward them, and thus, the negotiating parties would be likely to feel dissatisfied and offended and finally quit negotiations. In contrast, powerful negotiators’ extreme first offers are consistent with the schema possessed by negotiators, and high first offers are more likely to be accepted by the opposing parties, thus leading to agreements. We also propose that the powerful party’s perception mediates the relationship between the weak party’s first offer and the negotiation impasse.
Study 1 used a two-party, single-issue, distributive negotiation simulation to investigate the effect of first offers. The exercise described a bonus negotiation between an MBA student in the job market (job candidate) and a personnel manager from a consulting company. Study 2 used a similar exercise, but the power discrepancy was manipulated with the personnel manager having more power than the candidate. Study 1 comprised 116 MBA students who formed 58 negotiating dyads, and Study 2 comprised 266 students forming 133 dyads. They were required to participate in the studies as part of a negotiation class. ANOVA and hierarchical regression analysis were used to test the hypotheses.
In Study 1, 37 dyads (64%) arrived at agreements and 21 dyads ended with impasse. An ANOVA showed that the higher the first offers, the more likely was it that the negotiation dyads reached an impasse. In Study 2, 100 dyads (75%) reached agreements and 33 dyads failed to reach agreements. This showed that when power asymmetry existed, the negative impact of the first offer on impasse was moderated by the negotiating role. In particular, the high first offer proposed by the weak party was more likely to result in impasse. Mediation analysis revealed that when low-power negotiators made extreme first offers, they were perceived as being too aggressive, which finally led to a negotiation impasse.
This research demonstrates that the first offer is a significant predictor of the negotiation impasse. In addition, we discovered the moderating effect of negotiation roles on the relationship between the first offer and the impasse, providing a deeper understanding of the power dynamics involved in negotiation.
The practical implications of this research are as follows: Although high first offers are often advised to obtain an advantage in negotiations, our results suggest that while a high first offer could improve benefits, it could also increase the possibility of an impasse. Negotiators should pay attention to such an effect, particularly those negotiators who are in a relatively less powerful position

Key words: First offers, negotiation impasse, power, schema