Cheap Talk, Round Numbers, and the Economics of Negotiation

Matthew Backus, Thomas Blake and Steven Tadelis

No 21285, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Can sellers credibly signal their private information to reduce frictions in negotiations? Guided by a simple cheap-talk model, we posit that impatient sellers use round numbers to signal their willingness to cut prices in order to sell faster, and test its implications using millions of online bargaining interactions. Items listed at multiples of $100 receive offers that are 5% - 8% lower but that arrive 6 - 11 days sooner than listings at neighboring "precise" values, and are 3% - 5% more likely to sell. Similar patterns in real estate transactions suggest that round-number signaling plays a broader role in negotiations.

JEL-codes: C78 D82 D83 M21 (search for similar items in EconPapers)
Date: 2015-06
Note: IO PR
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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