Dealmaking: The New Strategy of Negotiauctions (Second Edition)

Should you always make a first offer in order to make use of the anchoring phenomenon? Not quite. There are two distinct risks in making a first offer. One risk is that you anchor too aggressively, well outside the ZOPA.

the risk that some bidders (even high-value bidders) will not play if the field is so wide open. The latter risk is particularly likely if bidders must incur costs—real or intangible—to make a bid.

experts might simply decline to participate in open-outcry auctions. If you want to deal with them, you will have to negotiate privately, or at least hold a sealed-bid auction.

Competition for the deal must be deployed in a nuanced way—seemingly small process choices can have big substantive implications.

The more the other side knows about the ZOPA, the less effective anchoring becomes.

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MESOs—multiple equivalent simultaneous offers. Put two or three different packages on the table—as different from each other as possible on the key negotiating points—that you are equally happy with (i.e., the offers need to be equivalent from your perspective).

Auction theorists call these kinds of auctions all-pay auctions, because all bidders must pay something, regardless of whether they win the prize. All-pay auctions are bad for bidders and great for sellers.

factors you should consider in determining whether to hold an open-outcry auction or a sealed-bid auction. In roughly descending order of importance, they are: (1) the number of potential bidders; (2) the degree to which bidders’ valuations are “affiliated”; (3) the degree of bidder risk aversion; and (4) the need to deter collusion among bidders.