Key takeaways
- In some bargaining situations, decision-makers may have private plans for every contingency. But when decisions are made on the spot, bargainers betray some of their private information, and this can influence the outcome of the deal.
- An analysis of bargaining exchanges on eBay shows that when a response to a buyer's first offer wasn't quick, the more likely a seller was to accept the buyer's second offer.
- Slow responses reveal that the seller actually finds an offer attractive; therefore, the buyer should follow up with another offer if they want to seal the deal.
Psychologists have discovered a strategy that could help eBay sellers make better deals: Don't delay when responding to buyer offers.
New research published in the Proceedings of the National Academy of Sciences — authored by a team that included UCLA — found that buyers were discouraged by slow rejections of their offers and, as a result, were less likely to make counteroffers. But buyers take note: The research also indicated that a slow response time could mean the offer was very close to the seller's desired price.
"The finding adds a new element to game theory — the scientific study of strategic interactions — by considering not just what people choose, but how quickly they choose it," said corresponding author and UCLA psychology professor Ian Krajbich.
On the online selling platform eBay, sellers can list items for sale at a fixed price but also allow buyers to make offers. The seller can accept or reject the offer. If they reject the offer, the buyer can make another one, which the seller can again accept or reject. The process continues until they agree on a price or one of them walks away. A buyer can also discontinue bargaining and click the "buy it now" button to purchase the item for the asking price.
In some bargaining situations, decision-makers may have private plans for every contingency. But when decisions must be made on the spot, the researchers asked, do bargainers betray some of their private information, and if so, can this influence the deal's outcome? For example, when bargaining over a price, a seller with a prepared plan can quickly accept or reject any offer. But without a prepared plan, the seller might need time to consider an offer, inadvertently revealing how attractive they actually find it.
The researchers, led by Complexity Science Hub Vienna postdoctoral scholar Miruna Cotet, who conducted the research during her time as a doctoral student at the Ohio State University, hypothesized that eBay sellers who take a long time to reject offers signal that they are on the fence about whether to accept or reject. The buyer's offer might have been close to the price they were hoping to get, and the buyer should make another offer. Sellers who reject an offer quickly signal that the buyer missed the mark by a long shot. Unless the buyer is willing to go much higher in price, it might not be worth making another offer.
Using a set of data from 2012 and 2013 recently made available by eBay for researchers to use, the authors analyzed about a million bargaining exchanges in a large number of sales categories. Researchers also created a few eBay accounts from which they made thousands of offers to hundreds of sellers, making each seller 10-20 offers for collectible cards, such as Pokemon and baseball cards.
Both the eBay and experimental data showed that sellers were, indeed, slower to reject better offers and faster to reject worse offers. The longer the seller's rejection time to the first offer, the more likely they were to accept the buyer's second offer. The finding was so strong that the researchers could predict whether a seller would accept the buyer's second offer based on how quickly they rejected the first offer.
"But what's maybe most surprising in these results is that buyers don't seem to be using this information as strategically as they should," said Krajbich. The lesson for buyers, Krajbich said, is that they should take a slow rejection as a positive sign that they were close and make a new offer.
"But we actually find the opposite. Buyers seem to be discouraged by slow responses from the seller. The slower the sellers were to reject them, the less likely buyers were to make another offer. In fact, buyers were more likely to make second offers to sellers who had slapped them down quickly," Krajbich added.
The researchers did not find any indications that slow rejections caused buyers to move on to other sellers, purchase the items using the "buy it now" button, or change their minds about impulse buys. These findings point toward directions for future research.
Sellers may be driving away buyers by responding slowly, according to the research. Meanwhile, buyers might end up paying higher prices or missing out on good deals altogether by not following up with slow-responding sellers.
"Take a slow response as a good sign rather than a bad sign," said Krajbich. "Don't get discouraged. Don't think that the seller is lazy or just dragging you along. Instead, consider that you might have them on the hook."
