digplanet beta 1: Athena
Share digplanet:

Agriculture

Applied sciences

Arts

Belief

Business

Chronology

Culture

Education

Environment

Geography

Health

History

Humanities

Language

Law

Life

Mathematics

Nature

People

Politics

Science

Society

Technology

For other uses, see Bargaining (disambiguation).
"Dicker" redirects here. For the surname, see Dicker (surname).
"Dickering" redirects here. For the wapentake of the historic East Riding of Yorkshire, see Dickering Wapentake.
Spice market Djerba, Tunisia.
Medina Tripoli, Libya

Bargaining or haggling is a type of negotiation in which the buyer and seller of a good or service debate the price and exact nature of a transaction. If the bargaining produces agreement on terms, the transaction takes place. Bargaining is an alternative pricing strategy to fixed prices. Optimally, if it costs the retailer nothing to engage and allow bargaining, he can divine the buyer's willingness to spend. It allows for capturing more consumer surplus as it allows price discrimination, a process whereby a seller can charge a higher price to one buyer who is more eager (by being richer or more desperate). Haggling has largely disappeared in parts of the world where the cost to haggle exceeds the gain to retailers for most common retail items. However, for expensive goods sold to uninformed buyers such as automobiles, bargaining can remain commonplace.

Dickering refers to the same process, albeit with a slight negative (petty) connotation.

Bargaining is also the name chosen for the third stage of the Kübler-Ross model (commonly known as the stages of dying), even though it has nothing to do with price negotiations.

Contexts where bargaining is allowed[edit]

Not all transactions are open to bargaining. Both religious beliefs and regional custom may determine whether or not the seller is willing to bargain.

Regional differences[edit]

In North America and Europe bargaining is restricted to expensive or one-of-a-kind items (automobiles, antiques, jewelry, art, real estate, trade sales of businesses) and informal sales settings such as flea markets and garage sales. In other regions of the world bargaining may be the norm even for small commercial transactions.

In Indonesia and elsewhere in Asia where locals haggle for goods and services everywhere from street markets to hotels, haggling is a strong cultural tradition that even children learn from a young age. Participating in that tradition can make foreigners feel accepted.[1] Haggling for food items is strongly discouraged in Southeast Asia and is considered an insult, because food is seen as a common necessity that is not to be treated as a tradable good.[2]

In almost all large complex business negotiations, a certain amount of bargaining takes place. One simplified 'western' way to decide when it's time to bargain is to break negotiation into two stages: creating value and claiming value. Claiming value is another phrase for bargaining. Many cultures take offence when they perceive the other side as having started bargaining too soon. This offence is usually as a result of their wanting to first create value for longer before they bargain together. The Chinese culture by contrast places a much higher value on taking time to build a business relationship before starting to create value or bargain. Not understanding when to start bargaining has ruined many an otherwise positive business negotiation.[3]

In areas where bargaining at the retail level is common, the option to bargain often depends on the presence of the store's owner. A chain store managed by clerks is more likely to use fixed pricing than an independent store managed by an owner or one of owner's trusted employees.[citation needed]

The store's ambiance may also be used to signal whether or not bargaining is appropriate. For instance, a comfortable and air-conditioned store with posted prices usually does not allow bargaining, but a stall in a bazaar or marketplace may. Supermarkets and other chain stores almost never allow bargaining. However, the importance of ambiance may depend on the cultural commitment to bargaining. In Israel, prices on day-to-day items (clothing, toiletries) may be negotiable even in a Western style store manned by a clerk.[citation needed]

In India, a sign posted with the phrase fixed price indicates that bargaining is not allowed, although quite often this is not the case.[citation needed]

Theories[edit]

Behavioral theory[edit]

The personality theory in bargaining emphasizes that the type of personalities determine the bargaining process and its outcome. A popular behavioral theory deals with a distinction between hard-liners and soft-liners. Various research papers refer to hard-liners as warriors, while soft-liners are shopkeepers. It varies from region to region. Bargaining may take place more in rural and semi-urban areas than in a metro city.[citation needed]

Game theory[edit]

Bargaining games refer to situations where two or more players must reach agreement regarding how to distribute an object or monetary amount. Each player prefers to reach an agreement in these games, rather than abstain from doing so. However, each prefers that the agreement favour his interests. Examples of such situations include the bargaining involved in a labour union and the directors of a company negotiating wage increases, the dispute between two communities about the distribution of a common territory, or the conditions under which two countries agree on nuclear disarmament. Analyzing these kinds of problems looks for a solution that specifies which component in dispute corresponds to each party involved.

Players in a bargaining problem can bargain for the objective as a whole at a precise moment in time. The problem can also be divided so that parts of the whole objective become subject to bargaining during different stages.

In a classical bargaining problem the result is an agreement reached between all interested parties, or the status quo of the problem. It is clear that studying how individual parties make their decisions is insufficient for predicting what agreement will be reached. However, classical bargaining theory assumes that each participant in a bargaining process will choose between possible agreements, following the conduct predicted by the rational choice model. It is particularly assumed that each player's preferences regarding the possible agreements can be represented by a von Neumann–Morgenstern utility theorem function.

Nash [1950] defines a classical bargaining problem as being a set of joint allocations of utility, some of which correspond to what the players would obtain if they reach an agreement, and another that represents what they would get if they failed to do so.

A bargaining game for two players is defined as a pair (F,d) where F is the set of possible joint utility allocations (possible agreements), and d is the disagreement point.

For the definition of a specific bargaining solution it is usual to follow Nash's proposal, setting out the axioms this solution should satisfy. Some of the most frequent axioms used in the building of bargaining solutions are efficiency, symmetry, independence of irrelevant alternatives, scalar invariance, monotonicity, etc.

The Nash bargaining solution is the bargaining solution that maximizes the product of an agent's utilities on the bargaining set.

The Nash bargaining solution, however, only deals with the simplest structure of bargaining. It is not dynamic (failing to deal with how pareto outcomes are achieved). Instead, for situations where the structure of the bargaining game is important, a more mainstream game theoretic approach is useful. This can allow players' preferences over time and risk to be incorporated into the solution of bargaining games. It can also show how the details can matter. For example the Nash bargaining solution for Prisoners' Dilemma is different from the Nash equilibrium.

Bargaining and posted prices in retail markets[edit]

Retailers can choose to sell at posted prices or allow bargaining: selling at a public posted price commits the retailer not to exploit buyers once they enter the retail store, making the store more attractive to potential customers, while a bargaining strategy has the advantage that it allows the retailer to price discriminate between different types of customer.[4] In some markets, such as those for automobiles and expensive electronic goods, firms post prices but are open to haggling with consumers. When the proportion of haggling consumers goes up, prices tend to rise.[5]

Processual theory[edit]

This theory isolates distinctive elements of the bargaining chronology in order to better understand the complexity of the negotiating process. Several key features of the processual theory include:

  • Bargaining range
  • Critical risk
  • Security point

Integrative theory[edit]

Integrative bargaining (also called "interest-based bargaining," "win-win bargaining") is a negotiation strategy in which parties collaborate to find a "win-win" solution to their dispute. This strategy focuses on developing mutually beneficial agreements based on the interests of the disputants. Interests include the needs, desires, concerns, and fears important to each side. They are the underlying reasons why people become involved in a conflict.

"Integrative refers to the potential for the parties' interests to be [combined] in ways that create joint value or enlarge the pie." Potential for integration only exists when there are multiple issues involved in the negotiation. This is because the parties must be able to make trade-offs across issues in order for both sides to be satisfied with the outcome.[6]

Narrative theory[edit]

A very different approach to conceptualizing bargaining is as co-construction of a social narrative, where narrative, rather than economic logic drives the outcome.

Automated bargaining[edit]

When a bargaining situation is complex, finding Nash equilibrium is difficult using game theory. Evolutionary computation methods have been designed for automated bargaining, and demonstrated efficient and effective for approximating Nash equilibrium.[7]

Anchor Pricing[edit]

Anchor price is the first call made during a bargain. The first call sets a condition of pricing biased towards the first caller.

See also[edit]

References[edit]

  1. ^ The Art of Haggling
  2. ^ How to Haggle in Southeast Asia
  3. ^ Bargaining in Western versus Chinese negotiations | Negotiation Experts
  4. ^ Wang, Ruqu (1995). Bargaining versus posted-price selling, European Economic Review, 39(9), 1747-1764
  5. ^ Gill, David and Thanassoulis, John (2009). The impact of bargaining on markets with price takers: Too many bargainers spoil the broth, European Economic Review, 53(6), 658-674 SSRN 1127627
  6. ^ "?". 
  7. ^ "?".  Automated Bargaining project at University of Essex.

Further reading[edit]

The articles in the list were not used in the creation of this article, but provide further background information on the topic. If you are reading this article, and have access to these sources, please consider editing this article and adding references from these sources. -- if you've added a reference, please remove the article from this section.


Original courtesy of Wikipedia: http://en.wikipedia.org/wiki/Bargaining — Please support Wikipedia.
This page uses Creative Commons Licensed content from Wikipedia. A portion of the proceeds from advertising on Digplanet goes to supporting Wikipedia.
79184 videos foundNext > 

Indian vs Chinese Bargaining

A comedian depicts an Indian trying to get a bargain dealing with a Chinese shop merchant.

Negotiation tutorial: Bargaining tactics | lynda.com

This negotiation tactics tutorial defines the two main strategies for negotiation: distribute bargaining and interest-based bargaining. Watch more at http://...

17. Backward induction: ultimatums and bargaining

Game Theory (ECON 159) We develop a simple model of bargaining, starting from an ultimatum game (one person makes the other a take it or leave it offer), and...

Tips on Bargaining in China

Watch and learn how to bargain at Beijing's Silk Street Pearl Market. As WSJ's Andy Jordan shows us, "a little more" is an unofficial sport in the Chinese ca...

REVERSE BARGAINING PRANK

VLOG CHANNEL | http://www.youtube.com/MoreJStu Follow us on Instagram/Twitter! @ItsJustinStuart @AndrewScites Business Inquires ONLY, email Justin Stuart - J...

Pro Tips for Bargaining in China -- Local Laowai ep. 28 -- BON TV China

Go to: bon.tv/locallaowai to watch all episodes of Local Laowai! Here in China, tourists and locals alike often find themselves trying to bargain their way t...

BARGAINING IN THE SOUKS- DUBAI

The Souks are easily one of my favorite parts of Dubai. While they can be overwhelming, they're definitely a fun experience. I have to thank these guys for b...

Storytime: Bargaining | ilikeweylie

What do you think about bargainers? Follow me - - - TWITTER: http://www.twitter.com/callmeweylie FACEBOOK: http://www.facebook.com/callmeweylie TUMBLR: http:...

Bargaining Skill at Silk Market in Beijing-Beijing Travel Tips

This video will teach you how to bargain with shop vendors at silk market in Beijing. Buying without bargain will make you lose a lot of money, it's a tip to...

WILSHIRE LANGUAGE SCHOOL - SAMPLE LESSON - BARGAINING

SAMPLE LESSON - BARGAINING www.wilshirelanguage.com Wilshire Language School is an English as a Second Language(ESL) school on Wilshire center in Los Angeles...

79184 videos foundNext > 

25361 news items

 
IHS Jane's 360
Wed, 20 Aug 2014 09:30:00 -0700

On 17 August, former president and ex-Séléka leader Michel Djotodia announced the establishment of an independent secular state in northern Central African Republic (CAR). Attempt by the predominantly-Muslim rebel movement, Ex-Séléka to secede the ...

Jamaica Observer

Jamaica Observer
Tue, 19 Aug 2014 23:18:09 -0700

THE Bustamante Industrial Trade Union (BITU) has won bargaining rights on behalf of the cabin crew of Fly Jamaica Airline. The airline's flight crew, comprising cabin and senior cabin crew, voted solidly for the BITU, in a poll which lasted over four ...
 
Washington Post (blog)
Tue, 12 Aug 2014 07:37:30 -0700

One of the reasons often cited for why women make less than men is that they're not as willing to negotiate. Yet more and more research has shown that the stereotypes held by those on the other side of the table are just as much of the problem.

NBCSports.com

NBCSports.com
Thu, 14 Aug 2014 15:22:51 -0700

It's one thing for the NFL to leak to the media an intention to increase the penalties for domestic violence, the clearest sign yet that the league realizes that running back Ray Rice's suspension was too light. It's quite another for the NFL to ...
 
The Register-Guard
Tue, 19 Aug 2014 17:15:34 -0700

The district's associate director of human resources, Christine Nesbit, now will head the district's bargaining team, spokeswoman Kerry Delf said. Nesbit will replace Kelly Noor, of the Salem-based law firm Garrett Hemann Robertson P.C., who had been ...
 
Al-Monitor
Tue, 19 Aug 2014 10:03:45 -0700

However, it was transformed into a political bargaining chip, to the detriment of humanity and in favor of political interests in the region. Ever since Abdel Fattah al-Sisi assumed the Egyptian presidency after the ousting of the Muslim Brotherhood's ...

The Guardian

SNP (press release)
Wed, 20 Aug 2014 07:03:45 -0700

Nobel Prize winning economist Professor Joseph Stiglitz today said he believed Scotland “could” be independent as he highlighted the fact that Westminster's currency bluff is nothing more than campaign rhetoric, saying that “The position of England ...

Fox News

Huffington Post
Thu, 31 Jul 2014 05:37:11 -0700

(AP) — The Wisconsin Supreme Court has upheld the 2011 law that effectively ended collective bargaining for most public workers, sparked massive protests and led to Republican Gov. Scott Walker's recall election and rise to national prominence.
Loading

Oops, we seem to be having trouble contacting Twitter

Talk About Bargaining

You can talk about Bargaining with people all over the world in our discussions.

Support Wikipedia

A portion of the proceeds from advertising on Digplanet goes to supporting Wikipedia. Please add your support for Wikipedia!