Bargaining is a fundamental part of doing business, whether it’s for an everyday interaction like buying used furniture on Facebook Marketplace or a high-stakes negotiation involving wages or trade agreements.
“Bargaining is everywhere,” says Caio Waisman, an economist and an associate professor of marketing at the Kellogg School.
It’s been a focal point for businesses and economists since at least the early 20th century. For example, John Nash, the Nobel Prize laureate featured in the film A Beautiful Mind, wrote a paper about bargaining in the 1950s. And research has found that time—or more specifically, how buyers and sellers delay in responding to offers—is a powerful tool in bargaining.
“Delay is important because it’s one of the few levers that you can use to influence the outcome of a negotiation,” says Jessica Fong of the University of Michigan.
Due to the limited availability of real-world data, studies like Nash’s seminal paper have been based on theoretical models. But with the recent emergence of online platforms like eBay and Alibaba, where massive amounts of people bargain every day, “there’s an opportunity to study how bargaining actually happens in the real world where we couldn’t really before,” Fong says.
So when Waisman and Fong obtained publicly available data for millions of negotiations on eBay—one of the largest and earliest online marketplaces—they were motivated to find out what really happens when buyers and sellers take longer than usual to respond while negotiating the price of a product.
They found that the longer a person took to respond to an offer or counteroffer, the less likely the other side was to continue negotiating.
And this decision had different downstream effects for buyers and sellers. The more the seller delayed, the less likely the buyer was to buy the product. In contrast, the more the buyer delayed, the more likely the seller was to agree to sell the product at the buyer’s offered price.
By and large, the way people delayed and responded to delays on eBay matched how prior studies theorized they would.
“There is a lot of common general wisdom but relatively limited evidence about how people bargain and negotiate,” Waisman says. “So showing that people in a large, informal setting delay somewhat consistently with how theory suggests they would—that has value.”
The impact of delays
While eBay is best known for its multiparty auctions, many transactions boil down to a one-on-one negotiation between buyer and seller.
For their study, Waisman and Fong looked at the various one-on-one negotiations for 5,916,590 listings from 2012 to 2013. In each case, the buyer made an offer for a listing. The seller responded by accepting or declining the offer—or by making a counteroffer that the buyer could then respond to by accepting, declining, or making a counteroffer. At the time of the study, eBay allowed up to six total counteroffers per negotiation, and each counteroffer had a shelf life of 48 hours.
The researchers found that sellers took an average of 5.4 hours to make a counteroffer, whereas buyers took 6.1 hours to do so. In other words, buyers tended to delay their counteroffers for longer than sellers did.
What’s more, they found that delaying had a significant impact on the outcome of a negotiation. “The longer that you take to respond to an offer, the less likely the other person is to counter,” Fong says, “and the more likely they are to end the negotiation by accepting or declining.”
To be specific, when a seller took two times longer than average to make a counteroffer, the buyer was 6.3 percent less likely to make their own counteroffer and 3 percent more likely to reject the seller’s counteroffers—and the likelihood that the product eventually sold fell by 4.4 percent. Yet when sellers did sell a product, doubling the response time increased the final sale price by $0.74, relative to the buyer’s initial offer.
In comparison, when a buyer took twice as long as average to make a counteroffer, the seller was 4.4 percent less likely to make another counteroffer but 5 percent more likely to accept the buyer’s counteroffer. This ultimately increased the likelihood of a sale, though the effect was not significant.
A robust effect
These findings held even under circumstances where delays would be expected to play a much smaller role, such as in negotiations for cheap products or when the delays were relatively brief.
For products priced below $30, for example, when sellers took two times longer than average to make a counteroffer, the buyer was 9 percent less likely to make a counteroffer—and more likely not to buy the product despite the relatively low cost.
The researchers confirmed that these effects were a result of increased delay, rather than other causes, by factoring into their analysis how long individual buyers and sellers delayed in previous negotiations for other products.
“The idea was that people have their own way of bargaining that’s inherent to them and that is not necessarily related to the specific person with whom they’re bargaining or the specific product they’re bargaining for,” Waisman says.
Bargaining power
The buyers’ and sellers’ behavior on eBay mirrors a longstanding theory that delay is a signal of bargaining power.
According to the theory, buyers or sellers who stand to gain more from a purchase or sale are more likely to act quickly. But those who stand to gain less are more willing to wait.
“By acting quickly as a buyer, I am showing that I value the good a lot,” Waisman says. “On the flip side, if I as a buyer delay a lot, it means that my willingness to pay is not that high.”
So the fact that buyers took longer to respond than sellers did, and declined counteroffers more readily, suggests that “buyers have more market power in general on eBay,” Fong says. “If the negotiation takes too long, buyers can easily go find another similar product. Whereas for the seller, a buyer coming across their product is more rare, so they’re more willing to concede.”
“The main takeaway,” she continues, “is that, if you see a person delaying, you assume they don’t care as much. And that could apply to any setting where there’s negotiation.”
Though people’s behavior on eBay might not translate perfectly to every other type of negotiation, the overarching idea behind delay applies to many scenarios. For instance, if a group of workers goes on strike and holds the line despite receiving offers, that would signal they are in a strong-enough position to wait for an even better offer. Or if a freelancer on a gig platform like UpWork or NextDoor takes a long time to respond to a poster’s job offer, they might infer that the freelancer has other prospects, which might compel them to up the offer.
“If you’re negotiating with someone, seeing how long they take to respond—whether or not it helps you negotiate better—is a piece of information that you can use,” Fong says.