You're Robbing Yourself With Poor Haggling

We talk about the fact that if you're a buyer and are too optimistic about how low you can push a seller, you'll figure out that your "ambitious" estimate was wrong. But if you incorrectly believe you won't be able to push the seller much at all, you begin the negotiation too modestly and give away too much, too easily. Your modest estimate becomes self-fulfilling through your modest actions. It's this lack of feedback on the truth that really traps people into thinking that they have always pushed the price close to their opponent's limit.

Are there certain groups of people that are better at negotiating deals than others?

Some cultures -- both national cultures and "industry" cultures -- bring with them strong norms to ask for a lot at the beginning of a negotiation and expect to haggle. Anyone from a country where there are street bazaars and most prices are negotiated will be good at this "dance" by habit. People with this experience are less likely to fall victim to the effect that we found.

If people were better at negotiating, how much money, at a minimum, would you estimate it would mean to their bank account -- both in purchasing items for less and selling items for more -- over a lifetime?

This is too difficult to answer. There is a limit on the value of being more aggressive in opening offers, which is that negotiations may take longer and one has to consider the opportunity cost of time. But certainly on big-ticket items, it makes sense to be well informed about the value of a product (e.g., a car), have good rationales for a low price, and then be very ambitious in giving opening offers.