Deep Pockets and Poor Results: The Effect of Wealth Cues on First Offers in Negotiation

Abstract

In this article, we examined the effect of external cues on first offers in negotiation. Specifically, we present the results of three experiments and an internal meta-analysis through which we investigated the relations between buyers’ external characteristics, which serve as cues of economic wealth, including their clothes, cars and country of origin, and sellers’ first offers in negotiation. We found that when external cues indicated wealth, counteroffers were less beneficial to those communicating the cues, resulting in higher first offers by their counterparts. We suggest, and provide empirical evidence, that these effects will emerge as long as the wealth signal is salient and perceived as an indication for the counterpart’s ‘deep pockets’, or ability to pay.