MINNEAPOLIS (WCCO) — Most of us are used to throwing out round numbers when it comes to negotiating. Perhaps it’s $30 for Twins tickets instead of $28? Or perhaps it’s $250,000 instead of $249,600 for a new home?
A new study in the upcoming Journal of American Psychology finds people who start negotiations with precise number will ultimately end up with a better price.
The study’s results haven’t yet been published.
“People who use precise numbers seem more informed, they’ve done more research, they know more about the market,” said Dr. Malia Mason, Gantcher Associate Professor of Management at Columbia Business School. “People who use round numbers come across as uninformed, they’re just estimating and the numbers seem arbitrary to the recipients.”
Mason videotaped and studied simulated negotiations with 1,254 students. She found negotiations that led with precise rather than round numbers are more effective and have better settlements.
“Don’t just throw a number out there. Tell people where it comes from,” she said. “To the extent that you seem informed and prepared, you’re going to be better off in a negotiation.”
A similar Cornell University study found three zeros at the end of a home’s asking price lowered the final price by .73 percent.
As far as salary discussions, Mason thinks that’s bit of a different story. In that case, people aren’t just talking about pricing decisions, but other factors like vacation or office space than can affect the negotiations.