Salary negotiation: Everything you’ve been told is wrong

November 9, 2012, 4:18 PM UTC

FORTUNE — There comes a point in every successful job interview when it’s time to talk money. The standard advice to job applicants has long been to play it coy.

John Challenger, CEO of outplacement firm Challenger, Gray, and Christmas, urges applicants to “let the employer name a salary first — it may be higher than you expect.” Penelope Trunk, founder of Brazen Careerist, advises that “the right answer to the question, ‘What’s your salary range?’ is almost always some version of ‘I’m not telling you.’”

This often leads to an uncomfortable, even adversarial, game of chicken. If that’s the sort of conversation you dread, here’s good news: there are better alternatives.

MORE: Weighing the merits of an online MBA

A recent study out of the University of Idaho found that making a joke about a million-dollar salary actually increased subsequent offer amounts by more than 10%.

The hypothetical applicant in the study’s test scenario was an administrative assistant candidate who had listed her last salary as $29,000. When asked what salary she wanted in the new job, she either demurred or quipped, “Well I’d like a million dollars, but really I just want what’s fair.”

In the cases where the applicant declined to name any number, the average salary offer was about $32,500. When she joked about a million bucks, the average offer rose to almost $36,200.

The increase is a function of a psychological effect known as “anchoring.” “When we encounter a number — even an irrelevant number — we fixate on it, and it influences our judgment,” says Todd Thorsteinson, a psychology professor at the University of Idaho and the study’s author.

But before you start throwing numbers around, you should consider the potential for backlash. “In practice, if one’s negotiating partner opens with an offer that is too extreme, the most common response is to disengage from the negotiation,” warns Rachel Croson, professor of economics at the University of Texas at Dallas and director of the school’s Negotiations Center.

Participants in Thorsteinson’s study were not given the option to decline to hire the candidate, but were merely asked how much they would offer to pay her.

So should job applicants make a high-salary joke in hopes of increasing compensation?

MORE: Vote: Businessperson of the Year Round 2

Only if you’re comfortable with the possibility that you might lose the job offer altogether, says Croson. Before recommending the strategy in general, she’d want to see a follow-up study that quantifies the level of risk involved — for example, “what percentage of interviewers would be turned off by the joke and choose to find a different employee.”

Being the first to talk numbers can still pay off, though. The standard advice — to dodge the question — ignores the very real effects of anchoring.

The key is information, says Croson, who has taught negotiation strategies to undergraduates, MBAs, and executives for 18 years. If an applicant knows the salary range for a given position and can name a number at or near the top of what a company is willing to pay, being the first to throw out a dollar figure is always to her advantage.

Challenger still prefers to play it safe. “Companies are all over the map,” he says. “The same position may pay 20% more or less, depending upon that company’s specific salary structure.”

But with company-specific salary data available from sites like, today’s job candidates have at least a fighting chance to set a high anchor and come out ahead.

Croson also recommends researching the culture of a corporation — is it individualistic and competitive? Then tough negotiation is fair game. In other environments, aggressive haggling won’t play as well.

MORE: Zen and the art of global domination

It’s important to remember, says Challenger, that “you’re negotiating with someone who may be your next boss, setting up a relationship for the future.”

Croson agrees. “Neither side wants to look like a jerk … or a creampuff,” she says.