Dateline: April, 2021, Issue 4
A plaintiff's attorney can request damage awards and make settlement offers using more precise or less precise amounts in the request.
Conklin (2020) studied whether a plaintiff's attorney can increase the punitive damages awarded simply by requesting a more precise amount of money. A survey was given to 609 people that contained demographic questions, a summary of a products liability case, a punitive damages request, and a question asking what amount -- if any -- survey respondents would award in punitive damages. The punitive damages requested by the plaintiff's attorney varied across the surveys, being either $497,000 (a more precise lower amount), $500,000 (a round less precise amount) or $503,000 (a more precise higher amount). Awards of punitive damages for the precise requests were 6% higher on average ($382,191) than the punitive damages awarded in response to the round less precise request ($359,000).
This request precision effect is not limited to punitive damages awards.
Mason et. al (2013) found that when a precise amount is initially presented in a negotiation ($1,486) the opposing party is more likely to assume the number is based on subject-matter knowledge than when a round number is initially presented ($1,500). This belief -- that a good objective reason exists for the precise initial amount -- resulted in counteroffers that deviated less from the original offer than when round numbers were initially used.
As precision in requested amounts increases, so does the effectiveness of the request. Loschelder and colleagues (2013) report that while moderately precise offers are more effective than round offers, highly precise offers are even more effective than moderately precise offers. Further, increased precision in the initial offer enhanced the perceived credibility and expertise of the person making it.
Janiszewski and Uy (2008) studied why precise amounts yield larger awards, finding that precise amounts make deviations from them appear to be more severe because people use different scales to judge how far a counteroffer is from an initial request. A counteroffer of $1,300 for a $1,500 initial request is typically perceived on a scale that utilizes $100 increments, and so the counter offer is only "two increments" from the initial request. An initial request of $1,490 encourages use of a perceived scale for counteroffers of $10 increments, and so a $1,300 counteroffer is "19 increments" from the initial request. An identical counteroffer to a precise amount is judged to be much more extreme, less acceptable, and so less likely.
Recipients of numerically more precise requests believe the amounts are more informative of the true value of what is being decided, give more credibility to the requestor, judge deviations from the requests as being more extreme, and anchor their awards and counteroffers more closely to the amount requested.
Source Conklin, M. (2020). Precise punishment: Why precise punitive damage requests result in higher awards than round requests. SSRN, Abstract 3688471.
Source Mason, M.F., Lee, A.J., Wiley, E.A. & Ames, D.R. (2013). Precise offers are potent anchors: Conciliatory counteroffers and attributions of knowledge in negotiations. Journal of Experimental Social Psychology, 49(4), pp. 759-763.
Source Janiszewski, C. & Uy, D. (2008). Precision of the anchor influences the amount of adjustment. Psychological Science, 19(2), pp. 121-127.
Source Loschelder, D.D., Stuppi, J. & Trotschel, R. (2013). "€14,875?": Precision boosts the anchoring potency of first offers. Social Psychology and Personality Science, 5(4), pp. 491-499.