Undervaluation versus unaffordability as negotiation tactics: Evidence from a field experiment

Abstract

We use a field experiment to evaluate the impacts of two price negotiation tactics on buyers’ bargaining payoffs in a marketplace where face-to-face haggling determines price and sellers often cheat on the weight. We implement three scripted interventions, all involving undercover buyers requesting a non-specific price discount. In one of the non-baseline interventions, buyers undervalue the product, while in the other, buyers reveal their inability to pay the quoted price, both at the discount-request phase. The data from a within-seller design show that compared to devaluing the opponent’s product, mentioning one’s lack of affordability leads to a higher rate of bargaining success and a higher mean price discount, culminating in a higher buyer payoff net of the monetary value of cheating. We also find that merely asking for a discount without furnishing a reason, as in our baseline intervention, leads to better bargaining outcomes for buyers than underestimating the opponent’s product.