When Negotiating a Price, Never Bid with a Round Number

Here’s a negotiating tip I found recently from the HBS Working Knowledge blog site. When you make an initial offer, don’t bid with a round number like $10,000 or $1 million or $15 per share. Rather, bid with a more precise number, like $9,800 or $1.03 million or $14.80 per share.

According to a recent study of mergers and acquisitions, investors who offer “precise” bids for company shares yield better market outcomes than those who offer round-numbered bids.

The blog article, based on research by Matti Keloharju, a visiting scholar at Harvard Business School, focuses on the application of social psychology to problems in the world of finance. The research is fascinating (and illuminating), and can be accessed at:

http://hbswk.hbs.edu/item/when-negotiating-a-price-never-bid-with-a-round-number

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