Is cash king? The influence of payment form on price negotiations

This research demonstrates that frontline salespeople’s negotiation behavior is shaped by a customer’s payment form. Across two experiments and a field study, we find that customers who pay with cash receive larger negotiated price discounts than those paying with noncash methods (e.g., debit, credit, or financing). This effect arises because frontline salespeople perceive cash-paying customers as having greater negotiation power, prompting more substantial price concessions. This effect weakens when salespeople have greater product knowledge. By focusing on the salesperson’s perspective in real-time price negotiations, this work contributes to research on payment methods, negotiation dynamics, and power in personal selling. It also offers practical insight for managers in B2C settings (e.g., automobile, furniture, jewelry sales) where negotiations are common and salespeople retain discretion over final prices.