Deal or No Deal? Impasse Risk of Round First-Offer Shares and Precision Mimicry

Abstract

Negotiations can end with a successful deal or with an impasse. To minimize the impasse risk, how assertive and precise should negotiators’ first offers be? Recent studies diverge in their findings as to the advantages and disadvantages of making round vs. precise offers. Based on over 25 million eBay negotiations, the present research establishes correlational evidence that buyer offers at round percentages of the seller’s list price—for instance, exactly 50% (75%, 90%, etc.)—coincide with a markedly smaller impasse risk than offers just above (e.g., 50.1%) or just below (49.9%) these round percentages. We also find that buyers who mimic sellers’ list price precision (e.g., offering $89.95 for a product listed at $99.99) and exact price endings ($30.13 for a list price of $40.13) incur markedly smaller impasse risks. Our findings show that the effectiveness of buyers’ round vs. precise offers depends on the roundness of the seller’s list price, therefore extending previous research that focused on offer precision without taking the opponent’s list price into account. Multiple robustness checks—examining negotiators’ experience, price levels, product demand, etc.—corroborate the reported findings. We discuss
promising avenues for future research on the interpersonal effects of offer precision and priceending mimicry.