“Negotiation is everywhere,” he says Caio Waismaneconomist and associate professor of marketing at the Kellogg School.
It has been a focal point for business and economists since at least the early 20th century. For example, John Nash, the Nobel laureate who appears in the film A beautiful mindwrote a paper on negotiations in the 1950s. And research has found that time—or more specifically, how buyers and sellers delay responding to offers—is a powerful tool in negotiation.
“Delay is important because it’s one of the few levers you can use to influence the outcome of a negotiation,” he says. Jessica Fong of the University of Michigan.
Because of the limited availability of real-world data, studies such as Nash’s seminal work have relied on theoretical models. But with the recent emergence of online platforms like eBay and Alibaba, where huge volumes of people trade every day, “there’s an opportunity to study how trades actually happen in the real world where we really couldn’t before,” says Fong.
So when Waisman and Fong obtained publicly available data on millions of transactions on eBay—one of the largest and oldest online marketplaces—they were motivated to learn what really happens when buyers and sellers take longer than usual to respond when negotiating the price of an item.
They found that the longer it took a person to respond to an offer or counteroffer, the less likely the other side was to continue negotiations.
And this decision had different consequences for buyers and sellers. The longer the seller delayed, the less most likely the buyer was going to buy the product. Conversely, the longer the buyer delayed, the more most likely the seller would agree to sell the product at the price offered by the buyer.
In general, the way people delayed and responded to delays on eBay matched the way previous studies had assumed.
“There’s a lot of shared general wisdom, but relatively limited evidence about how people bargain and negotiate,” says Waisman. “So to show that people in a large, informal setting delay somewhat consistently in the way that theory suggests—that has value.”
The impact of delays
While eBay is best known for its multilateral auctions, many transactions result in a one-on-one negotiation between buyer and seller.
For their study, Waisman and Fong looked at the various private negotiations for 5,916,590 listings from 2012 to 2013. In each case, the buyer made an offer on a listing. The seller responded by accepting or rejecting the offer—or by making a counteroffer to which the buyer could respond by accepting, rejecting, or making a counteroffer. At the time of the study, eBay allowed up to six total counter-offers per transaction, and each counter-offer had a lifetime of 48 hours.
The researchers found that sellers took an average of 5.4 hours to make a counteroffer, while buyers took 6.1 hours to do so. In other words, buyers tended to delay their counteroffers longer than sellers.
Furthermore, they found that delay had a significant impact on the outcome of a negotiation. “The longer it takes to respond to an offer, the less likely the other person is to respond,” says Fong, “and the more likely they are to end the negotiation with an acceptance or rejection.”
Specifically, when a seller took twice as long as average to make a counteroffer, the buyer was 6.3% less likely to make his own counteroffer and 3% more likely to reject the seller’s counteroffers—and the likelihood that the item will eventually sell decreased by 4.4%. However, when sellers did sell an item, doubling the response time increased the final sale price by $0.74, relative to the buyer’s initial bid.
In comparison, when a buyer took twice as long as average to make a counteroffer, the seller was 4.4% less likely to make another counteroffer, but 5% more likely to accept the buyer’s counter offer. This ultimately increased the probability of selling, although the effect was not significant.
A powerful result
These findings held even under conditions where delays would be expected to play a much smaller role, such as in negotiations for cheap goods or when delays were relatively short.
For items priced under $30, for example, when sellers took twice as long as average to make a counteroffer, the buyer was 9 percent less likely to make a counteroffer—and more likely not to buy the item despite the relatively low cost.
The researchers confirmed that these effects were the result of increased delay rather than other causes, taking into account in 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 negotiating that’s intrinsic to them and that’s not necessarily related to the particular person they’re negotiating with or the particular product they’re negotiating for,” Waisman says.
Bargaining power
The behavior of buyers and sellers on eBay reflects a long-standing theory that delay is a sign of bargaining power.
According to the theory, buyers or sellers who gain more from a purchase or sale are more likely to act quickly. But those who want to earn less are more willing to wait.
“By acting quickly as a buyer, I’m showing that I value good a lot,” Waisman says. “On the other hand, if as a buyer I delay too much, it means that my willingness to pay is not as high.”
So the fact that buyers took longer to respond than sellers and rejected counter-offers more easily suggests that “buyers generally have more market power on eBay,” Fong says. “If the negotiation takes too long, buyers can easily find another similar product. Whereas for the seller, a buyer who comes across their product is more rare, so they are more willing to concede.”
“The main takeaway,” he continues, “is that if you see a person delaying, you assume they’re not that interested. And that could apply to any negotiation setting.”
While people’s behavior on eBay may not translate perfectly to every other type of transaction, the general idea behind delay applies to many scenarios. For example, if a group of workers goes on strike and holds the line despite receiving offers, that would mean 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, it may infer that the freelancer has other prospects, which may force them to increase the offer.
“If you’re negotiating with someone, seeing how long it takes them to respond—whether it helps you negotiate better or not—is information you can use,” says Fong.
