I’m really bad at bargaining so I shouldn’t give advice on this issue. But the trick recommended in this paper really seems to make sense:

When negotiating for a salary, most of us reach for a nice, round number like $65,000. Or $90,000. Or $120,000.

But, by favoring all those zeros, we may be missing an opportunity to score a better deal, according to a new paper from researchers at Columbia Business School. They found that using more precise numbers in an initial request—or anchor, as it is known in negotiating parlance—generally results in a higher final settlement.

Precision conveys the impression that the job candidate has done extensive research and deeply understands the market for his services, said Malia Mason, the lead author of the paper and a professor at Columbia who teaches a course on managerial negotiations. When people use round numbers, by contrast, they’re conveying that they have only a general sense of the market rate for their skills.

…In one experiment, Ms. Mason and her team had 130 sets of people negotiate the price of a used car. When buyers suggested a round anchor, they ended up paying an average of $2,963 more than their initial offer. But buyers who suggested a precise number for a first offer paid only $2,256 more, on average, than that number in the end.

When it comes to negotiating salary, Ms. Mason’s research indicates that a job candidate asking for $63,500 might receive a counteroffer of $62,000, while the request for $65,000 is more likely to yield a counteroffer of, say, $60,000, as the hiring manager assumes the candidate has thrown out a broad ballpark estimate.

Usually I bargain when I am buying stuff, like a pair of shoes, a souvenir, or a cab ride home. Negotiating salaries does not happen very often. Here are some thoughts about the bargaining process in no particular order:

  • In theory you should determine how much you are willing to spend and stick to that decision. In reality, you don’t want to spend more than other people do.
  • The problem is that you often don’t know the “normal” (i.e.. average) price for some goods. That makes the asking price of the seller and your common sense the only reference points for your bargaining strategy.
  • (Asymmetric) information can make bargaining quite stressful. You keep asking yourself: am I being overcharged? Or the opposite: am I asking ridiculously low prices?
  • In the bargaining game (with asymmetric information), having the last word ends up being as important as the price itself. Sometimes you can be happy about very bad deals. Other times you might have a bitter mouth even though you got a very decent price.
  • If you show high interest for some items, the asking price will probably go higher. You should always try to signal low interest and low willingness to spend.

Yep, I often find the experience quite stressful.

HT Marginal Revolution