By Jeffrey KlugerJune 03, 2013
Let’s be honest, you’re not very good at haggling, are you? Can you even picture yourself involved in a good haggle? Likely as not the scene involves an open-air market, a live pig and a language you don’t speak. You offer 10 blunks — or whatever the local currency is — the seller demands 100, and you settle out somewhere around 55. Congratulations, the pig is yours!
Odds are, however, things wouldn’t work out that neatly. That’s because you may not know the first thing about haggling. That first thing, according to a study to be published in the upcoming edition of the Journal of Experimental Psychology is: whatever you do, avoid round numbers.
The hardest part of any good haggle is knowing where to start. You’re selling your ’98 Taurus (good luck with that) so you advertise it at $3,000. You’re negotiating over a salary, and you ask for $60,000. Maybe you’ll go up in increments of fives — $3,500 for the car or $65,000 for the job. But going into an interview and asking for, say, $68,250? You’d just seem odd. As it happens, though, there’s power in precision.
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Psychologist Malia Mason, a professor at Columbia University’s business school, had been intrigued for a while with the stubborn habit people have of assigning round values to things — or to themselves — even when the actual worth of the object or the person could be more or less. Most of that comes merely from convention. “It’s sort of counter-normative to be precise,” she says. “People use round numbers because they’re easier to use and it’s what we’re familiar with, so it’s a practice that sticks.” Indeed it does. On the real estate site Zillow, for example, Mason and her colleagues found that nearly all initial sale prices for homes are listed in round numbers, with barely 2% of sellers assigning a fixed value to their property.