Want to sell that stuffed kudu head you inherited from your Uncle Duane, and sell it fast? Put a round number on it: Say, $300. On the other hand, if you want the top dollar possible for that exemplary example of the taxidermist’s craft, list it for a precise figure—maybe $329.
That would be the opinion of Steve Tadelis, an associate professor at UC Berkeley’s Haas School of Business. In a working paper published by the National Bureau of Economic Research, Tadelis and co-authors Matthew Backus of Cornell University and Tom Blake of eBay Inc. determined that floating either round or precise numbers are both sound strategies for price negotiations—but they work toward different ends.
“We found that listings in multiples of 100 attract lower offers, but the items sell faster,” Tadelis says, “Round figures send a ‘weakness’ signal, they indicate that the buyer is deeply motivated to sell and is willing to take a hit on the price in order to move the item.”
An exact figure, on the other hand, indicates confidence in the real value of the item listed, and less willingness to dicker. That can deter potential buyers from even making offers, and if they do, the result tends to be more protracted haggling—and ultimately, less chance of closing a deal. But the prices on the sales that are concluded are likely to be higher than those that started out with round number quotes.
The findings correlate with earlier research by Columbia University business professor Malia Mason, which determined that picking a precise figure in negotiations signals strength and knowledge.
Tadelis and his colleagues based their conclusions on an analysis of eBay listings.
“Many people still think of eBay as a straight auction site,” says Tadelis, “but auctions are now actually in the minority. Most sales are concluded through the ‘Buy It Now’ option, which allows for negotiations.”
Tadelis and his team ultimately evaluated 8.5 million eBay listings. Of that figure, 2.9 million listings got at least one offer, and 1.9 million resulted in sales.
The “round figure signals desperation and quicker sales” trope also seems to hold for real estate sales, says Tadelis.
“We used MLS (multiple listing service) data to evaluate home sales, which aren’t as rich as the eBay data,” he says, “but we did determine that homes listed in round numbers sold at slight discounts. What’s particularly interesting is that real estate agents seem to somehow understand that round figures correlate with discounts and quicker sales. There seems to be a broad understanding in general that this is how you play the game: If you want to signal you’re willing to negotiate, that you’re willing to accept a price reduction, you list in round numbers.”
Which raises the question: Does the same dynamic hold for salary negotiations? If you really, desperately want a job, should you just throw out a round ballpark figure? Will that improve your chances of getting hired? Or is it better to start with a precise figure, thereby demonstrating a masterful knowledge of the job market, confidence in your talents, and an utter lack of craven need?
Tadelis has no specific advice on the job market. “We didn’t analyze any data on salaries,” he says. “My understanding of the job market is that the main benchmark for salary proposals is your current pay scale. Given that, our research is less likely to apply—though it might.”