Should you make the first offer? Anchoring, aggression and strategy in settlement negotiations

Law360 Canada (April 13, 2026, 12:14 PM EDT) --

Jennifer Egsgard

Is it better to make a first offer in negotiations? And what about aggressive first offers — do they set an advantageous anchor or lead to insult and impasse?

In Canada, 98 per cent of litigation doesn’t make it to trial, according to the Department of Justice. This implies that lawyers would do well to consider what negotiation research has to say about strategy, which can also be used during the facilitated negotiation of mediation.

Research suggests that in general, well-prepared parties making the first offer have an advantage. The first number put forward is said to anchor the negotiation as it tends to act as a subconscious reference point, influencing the final result.

The advantage of making a first offer is more clear-cut in simple two-party disputes compared to more complex matters or those involving multiple parties.

While anchoring in your client’s favour may lead to a more favourable result, attempting to anchor with an overly aggressive first offer can have the opposite effect, leading to impasse.

I’ve seen this happen in several mediations. Recipients of aggressive first offers often express anger and a diminished willingness to compromise. Subsequent negotiation rounds proceed in excruciating increments. Sometimes settlement is scuttled, other times it still happens but often takes longer and the road to it more painful. Although mediators usually reality-test offers being proposed, to support productive negotiations and avoid impasse, the strategic decisions are those of the parties.

Negotiation research backs up this experience, finding that aggressive first offers are more likely to offend an opposing party and lead to impasse. In instances where parties have value to gain from continuing work with one another, aggressive first offers have also been shown to dissuade the recipient from engaging in future business or negotiations, thus impacting future value from the relationship.

While every case has its own dynamics and considerations, remember that offers are essentially communications to the other side.

Assuming a favourable settlement is desired, a first offer should convey credibility, preparedness and a willingness to engage seriously. It’s helpful to consider how the other side is likely to perceive the offer, given what they know (or believe) about the case. Does it signal credibility, reasonableness and a genuine willingness to engage, opening space for negotiation, or does it convey inflexibility or a lack of appreciation of risk, and in doing so shut down receptivity and make resolution feel premature or out of reach before the negotiation has meaningfully begun?

In making this assessment, it’s important that you and your client enter negotiations or mediation with a clear understanding of the strengths and risks of your case, as well as your client’s underlying interests and objectives and how a potential settlement might meet them. This ensures that your anchor, subsequent negotiations and any resolution reached are based on a real understanding of the risks and opportunities presented by the negotiation so that any settlement reached — or rejected — is fully informed.

Negotiation strategy research offers additional nuance not covered here — the following meta-analysis of prior negotiation work is a good place to start for more detail: “The power and peril of first offers in negotiations: a conceptual, meta-analytic, and experimental synthesis” in Organizational Behavior and Human Decision Processes, Volume 191, 2025.

Jennifer Egsgard mediates commercial, employment, intellectual property, tort claims and other disputes. Her approach draws on insight from 18 years of Ontario legal practice and an exclusively mediation-focused career since 2019. A Harvard-trained mediator and Distinguished Fellow of the International Academy of Mediators, she brings perspective, preparation and persistence to every dispute. www.egsgardmediation.com. Subscribe to her newsletter, The Mediation Brief, or contact her via email here.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the author’s firm, its clients, Law360 Canada, LexisNexis Canada or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

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