[HN Gopher] When negotiating a price, never bid with a round num...
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When negotiating a price, never bid with a round number (2016)
Author : mhb
Score : 442 points
Date : 2022-05-06 09:10 UTC (13 hours ago)
(HTM) web link (hbswk.hbs.edu)
(TXT) w3m dump (hbswk.hbs.edu)
| ineedasername wrote:
| It seems like this is at least slightly backwards in reasoning.
|
| I think it has less to do with something _sounding_ more precise
| than it does with the fact that, in the real world, actual costs
| are only rarely a round number. As such, if there 's a
| psychological association of non-round numbers sounding more
| precise, it's because non-round numbers are actually much more
| common. This means if you provide a round number bid, you are in
| reality more likely to have given a value that is incorrect.
| tromp wrote:
| I bid 701k on my house, whose asking price of 645k seemed on the
| low side. After winning the bid, I asked what the next-highest
| bid was. Turned out to be 699k. I'm so happy they took this
| unrounding advice in the other direction :-)
| noitsnot wrote:
| Or you could use an escalation clause. Go above the highest bid
| by a certain dollar amount and cap the limit.
| op00to wrote:
| For a 2k difference, I hope the sellers evaluated both offers
| for contingencies that would complicate the transaction. It
| would suck to have to carry a house for an extra month or two
| and lose the $2k difference because Offer 701k can't get their
| financing together! :)
| arunprakash01 wrote:
| matwood wrote:
| This is how I bought my house back when the market was bad.
| We had cash and financing and _didn 't_ have another house to
| sell. In my case at the time, it was a pretty decent
| discount.
|
| It also helped the owner had been moved by his job, and was
| looking to get out of the house ASAP.
| Ensorceled wrote:
| Kind of weird to be accusing the commenter of being unable to
| get their financing together.
| lcnPylGDnU4H9OF wrote:
| I think they're suggesting the seller should understand the
| risks of their undertaking. If they didn't do their due
| diligence it could end up being the case that the offer
| they take was the "worse" offer because the person making
| it couldn't back it.
| LanceH wrote:
| That there are other considerations for a seller aren't
| really relevant when the post is about bidding just
| higher than a round number to win it. Just as explaining
| how you won the bid at 2k lower by having a cash offer
| and writing a nice letter and being accommodating with
| their move out times is irrelevant to the round number
| argument. The story of bidding 701k is clearly in the
| realm of "all else being equal", nudging the price up a
| relatively insignificant amount can have a significant
| effect.
| Ensorceled wrote:
| Right, but they are replying to the BUYER. The seller
| probably doesn't even know what HN is.
|
| It's just a weird thing to say to the BUYER, "ah, but did
| the SELLER look into your finances before they took your
| bid"
| op00to wrote:
| A lot of what's said on HN, in good faith, would sound
| totally weird in person.
| t_mann wrote:
| People seem to forget about that. As a seller, a smooth
| transaction is far more valuable to you than a .3% price
| difference (and troubles can get way more uncomfortable than
| just a delay; you don't want some three-letter agency come
| knocking at your door asking questions about your buyer or
| where their money came from). Just to be clear, if you're not
| going for the best offer for discriminatory reasons that's
| definitely not ok (morally and might also get you into legal
| trouble), but AML or financing concerns are very valid
| reasons.
| bell-cot wrote:
| > ...you don't want some three-letter agency come knocking
| at your door asking questions about your buyer or where
| their money came from...
|
| That does not sound realistic for a normal-homeowner U.S.
| real estate sale. There are generally two Realtors and a
| title company as professional intermediates in the
| transaction. The seller may only know the buyer's name if
| the seller spends time reading routine paperwork - which
| those intermediates create and handle. Why would the XYZ
| agents visit the seller - when the buyer's Realtor, buyer's
| bank, and title company have so much more information,
| insight, and experience on the matter?
| t_mann wrote:
| I know a guy who backed out of a real estate deal that
| he'd really wanted for that reason (AML). He's a banker
| himself, maybe that's why he was a bit more on the edge
| wrt AML, but his attorney also recommended it. That was a
| normal (ok, nice) one-family home in an affluent suburban
| area, not a rock star villa in Beverley Hills.
| t0mas88 wrote:
| Absolutely, you can bid lower if you add "cash in your
| account tomorrow". People are risk adverse, they want a
| solid offer that closes immediately.
| bitexploder wrote:
| When we sold our house ~6 months ago we had about 7 offers
| and we took a solid, but middle of the pack offer in terms
| of price. Their offer also had strong pre-approval and
| financial info and they were the fastest to respond when
| the house went on the market. This showed us they wanted
| our house in particular more than the other bidders,
| especially considering the pre-approval for their loan and
| their other financial details. They were still stretching a
| bit to buy the house, but they came through and closed in
| like 3.5 weeks on a jumbo loan. Did we leave a few dollars
| on the table? Probably. Were we happy with the outcome, yep
| :)
| mellavora wrote:
| I used to negotiate really hard. Barely left a drop for
| the other side.
|
| It's a losing strategy.
|
| I found I was much better off if I could give the other
| side real wins.
|
| Especially in repeated games.
| kqr wrote:
| What do you think negotiation is?
|
| Good negotiators find trades that are valuable for both
| sides of the table. That's how you negotiate well.
| bitexploder wrote:
| Game theory says you are leaving something on the table
| when you do that. But we are all humans first and
| optimized game theory machines second :)
| Spellman wrote:
| Game theory for repeated games actually says you want to
| seem like a fair or generous player so that the other
| side doesn't defect and keeps wanting to play the game
| with you.
|
| Single-round best strategy is squeeze and defect.
| kqr wrote:
| Game theory is great for zero-sum situations. Most
| negotiations are not.
| whimsicalism wrote:
| Financing? In 2022?
| tromp wrote:
| Indeed; my offer also came with no contingencies...
| t_mann wrote:
| haha, I wonder who's analyzed that game formally. feels a bit
| like the 2/3 game with flipped signs
| (https://en.wikipedia.org/wiki/Guess_2/3_of_the_average). for
| real numbers, the unique Nash equilibrium is 0, for finite
| precision numbers (which we're effectively dealing with in
| reality), the set of Nash equilibria is a bit more interesting.
|
| but of course, Nash equilibria don't always line up well with
| human behaviour. for the 2/3 game there's empirical work
| showing that the best strategy against inexperienced players is
| betting somewhere around 20 iirc. would be interesting if there
| are papers that would give a similar rule of thumb how much of
| a "premium" you should offer over the nearest sensible round
| number
| [deleted]
| JackFr wrote:
| "What's my cover?"
|
| Often bond dealers will put out "bid lists" to customers or
| other banks of relatively illiquid bonds and ask for
| competitive bids for a handful of bonds. Invariably the buyer
| with the winning bid on a bond would ask "What's my cover?",
| that is "How much more did I pay than the next best bid."
|
| Importantly, there is no legal obligation to tell the them or
| especially to tell them the truth, and invariably the response
| would be "a tick" (1/32). The only time I've heard someone say
| someone tell the truth with bad news for the customer was "No
| cover - you were the only bid."
| pc86 wrote:
| 701 is just as non-round as 699
| rovr138 wrote:
| hence,
|
| > I'm so happy they took this unrounding advice in the other
| direction :-)
|
| they went up, the others went down.
| pc86 wrote:
| Ah, I read it as going against the advice!
| gpvos wrote:
| True, but bidding is also the opposite from offering for
| sale, so it makes sense to go up instead of down like you see
| with the prices in shops.
| Uehreka wrote:
| Does it? The point of 699 is to get the highest price
| possible while hiding the most-significant digit. The
| opposite of that would be signalling a high most-
| significant digit while giving as little as possible, which
| would be 700. 701 just kind of looks like an esoteric joke.
| TonyTrapp wrote:
| This also often worked on ebay for me, e.g. if you are willing
| to spend 60 $currency on an auction, make your highest bid
| 61.52 or something like that. The extra 1.5
| dollars/euros/whatever doesn't really hurt but if there's many
| people who'd want to win the action for a similar price as you,
| it can be the distinguishing factor.
| toss1 wrote:
| Yup. Same here for eBay and industrial equipment auctions -
| figure out my approximate maximum, consider the nearby round
| number, then add something almost trivial like the "1.52" in
| your example. While it obviously doesn't help if the bidding
| runs up to another level, I've found it helps a surprising
| number of times. And if you actually want to win the bidding,
| definitely do not skimp to below or at the round figure -
| that marginal extra will provide way more value than the cost
| (i.e., not losing & spending more time & funds getting the
| item elsewhere).
|
| Now, I wonder how long it will take for auction systems to
| start suggesting this type of bid and ruining the strategy so
| we need to find another strategy...
| TonyTrapp wrote:
| > Now, I wonder how long it will take for auction systems
| to start suggesting this type of bid and ruining the
| strategy so we need to find another strategy...
|
| To be honest, the immediate issue that is already there in
| this very moment is that more and more people no longer
| sell their stuff as regular auctions on ebay, but as
| completely overpriced fixed-priced offers. This is the main
| distinguishing factor for me between using ebay ten years
| ago and now. If everyone starts doing that, the best
| bidding strategies become useless.
| planede wrote:
| ebay is basically a second price auction, although not
| sealed-bid. I try to follow the strategy to bid my true value
| near the end of the auction, this is my only bid. I bid at
| the end to minimize the effect my bid has on other bidders.
| Then I just let the auto bidder to take over.
| frou_dh wrote:
| It can sometimes be surprisingly difficult to sit down in
| isolation and decide what the ACTUAL maximum you're willing
| to pay for an eBay item is. That's part of the whole
| "auction" gimmick I guess: there can be an element of wanting
| to beat any competitors.
| tomxor wrote:
| That sounds like a closed bid, where any psychological tactics
| against other biders are ineffective... maybe if someone
| incorrectly attempts to apply open biding strategies it makes
| sense to think of number that would barely outbid those people
| (as you did).
|
| But to be honest I'm not sure what they were attempting to
| signal with 699, that's a sales strategy to make the price
| appear lower, surely you want it to appear the opposite. I
| guess some people copy strategies without understanding them.
| jwozn wrote:
| It's possible they were only approved up to a limited amount
| for a mortgage, and went to the top of that amount, or left
| some room for negotiation, and the top minus 5% came out to
| 699. Cash could also be a factor here.
|
| It could also be that the buyer couldn't stomach paying 700
| for the home, so they used the sales strategy on themselves
| to justify the price.
| Taylor_OD wrote:
| It just sounds to me like some person said, "I'm not paying
| over 700K for this house." without thinking about how the bid
| would come across.
| JumpCrisscross wrote:
| > _sounds like a closed bid, where any psychological tactics
| against other biders are ineffective_
|
| Other bidders aren't making the decision to sell. The seller
| is. $701k might deter a seller countering a $700k bid with
| $735k (5% more).
| gowld wrote:
| Other bidders are making the decision whether to increase
| their bid.
| bialpio wrote:
| I don't remember this was how putting an offer for a
| house worked. The seller is collecting a bunch of offers
| and picks the one they like the most. The offers can
| include escalation clause, but it's still more of a
| closed auction than the open auction.
| xenadu02 wrote:
| Bought a house in SF last year. We lost two offers before
| securing this place. Both of the lost offers followed
| this pattern:
|
| 1. Set a bid due date 2. Ask three best offers for their
| "Best Final Offer" 3. We increased our offer (50k 1st
| case which was generous, 150k second case) 4. Lost, move
| on to the next showing. In the second case our BFO was
| 400k over asking, ultimate winner offered 600k over
| asking. Insanity.
|
| When I sold my house in TX I also did the same: got two
| offers almost immediately after putting it on the market,
| so we went back to the buyers and asked for BFO. Both
| increased their offers.
|
| Funny enough for our third winning offer we saw it the
| day before the Open House (which just started being
| allowed again) and put in our offer the day of the Open
| House. Won for around 50k over asking. I'm not 100% sure
| but from what I gathered an investor who wanted to rent
| it as an upstairs/downstairs duplex offered more but they
| wanted to sell to another family so they took our offer
| without asking for more money. I was very thankful for
| that - if they had come back asking for better offers
| we'd have walked.
| toast0 wrote:
| The seller doesn't have to accept one of the offers, they
| can ask bidders to rebid or just let it sit on the market
| longer. If they got a lot of offers clustered around
| $700k, they might take the best (which might not be the
| largest, if there's a difference in contingencies), or
| they might try to get everyone to rebid, or maybe just
| the lower bidders to try to go back and forth. Of course,
| asking for a rebid usually means not accepting the firm
| bid, and there's a risk of putting off the potential
| buyers.
| throwawayboise wrote:
| If the ask was 645K and the seller got a bid of 700K would
| they counter higher? As a buyer I'd tell them to fuck off.
| davio wrote:
| My realtor says when they have multiple offer and send
| out a request for "Best and Final Offers", hardly anyone
| ever changes their offer. They seem to be insulted about
| being asked for more after bending over backwards by
| going over ask, waiving all contingencies, etc.
| vkou wrote:
| Listing price isn't asking price, it's just advertising
| to get your foot in the door.
|
| If sellers got more money by listing their homes for $1,
| they'd be listing their homes for $1.
| joedissmeyer wrote:
| I had an extremely similar situation when we purchased our home
| last year. The home had an estimated valuation of 320k but
| because of the ridiculousness of the US housing market bids
| were going for upwards of more than 20k higher than the asking
| prices. We put in our bid for 341,100 - and we got it. I found
| out later that the next highest bid was exactly 340,100. That
| extra 1k in our offer made the difference for us.
| astura wrote:
| The reason someone would accept a slightly lower bid for a
| house is the funding source is easier/more likely to go though.
| Nothing to do with the roundness of the bid.
|
| That's assuming the $699k bid isn't entirely fictitious, which
| it probably is. Both agents have an incentive to make the buyer
| feel good about the transaction and not like they overpaid when
| they did.
| danielmarkbruce wrote:
| Why didn't you bid 702?
| r3trohack3r wrote:
| Another extremely successful tactic I stumbled upon by accident:
| electing a 3rd party decision maker that the other negotiator
| can't communicate with. Without the communication channel, the
| other negotiator is forced to "sweeten the deal" instead of using
| conversational skills.
|
| I received a job offer while my wife was traveling. The number
| was right for me and the job/company was right. But I told the
| hiring manager that I needed to talk it through with my wife
| first and that I'd need a few days (no context about why I needed
| the time or which direction I expected it to go).
|
| She got home 3 days later. We sat down, talked it through for 10
| minutes, and we were ready to accept.
|
| In the time between the initial offer and accepting the offer, I
| received 3 updated offers with increasing compensation. The final
| offer I accepted was $75k higher than the initial offer.
|
| After experiencing that, I've noticed companies use this tactic
| frequently. When you call into a help center, often times the
| phone operator "will need to talk to their manager" who is
| authorized to make the actual decision. You aren't allowed to
| talk to the manager - all communication goes through the
| intermediary. I suspect they are aware that this is an effective
| negotiating tactic.
| nickff wrote:
| I agree with you about the benefits of disallowing your
| counter-party from communicating directly with the final
| decision maker (for the purposes of a negotiation), but I don't
| think that's what call centers are doing. Front-line agents
| screen a lot of calls by people who have easy-to-resolve
| issues, or are just angry..
| TameAntelope wrote:
| Hm, that probably won't work against a competent negotiator,
| but it makes sense! They invent some nightmare scenario where
| they lose you, and they end up bidding against their nightmare,
| rather than you.
| jandrese wrote:
| > electing a 3rd party decision maker that the other negotiator
| can't communicate with
|
| This is why every dealership salesman "has to go talk it over
| with his manager" at some point in the negotiation.
| jacquesm wrote:
| The manager might not even exist.
| TZubiri wrote:
| This is a matter of taste
|
| I'd rather work with round numbers and settle things verbally or
| in paper than having to use a calculator like a nerd.
|
| https://www.forbes.com/sites/tomiogeron/2012/04/09/facebooks...
| ipaddr wrote:
| A nerd doesn't use a calculator they can do simple math in
| their head.
| BolexNOLA wrote:
| When I would do estimates for clients I'd regularly say
| something along the lines of "devil's in the details but this
| job sounds like it's in the $5k-$7.5K range." Then if they
| still wanted to play ball, I'd send an actual quote and
| contract, which usually was more precise (e.g. total of
| $7250.00 or whatever).
|
| Now when it came to grant writing, I was definitely a little
| more prone to trying to make the numbers look specific out the
| gate. "I need $10,000" sounds like a gut number regardless of
| context, so in a case that really was the estimate (it
| happens!) I'd say "$9,850" or something. Usually a 10%
| misc/"the unexpected" line item took care of it though.
| ryan_j_naughton wrote:
| > than having to use a calculator like a nerd.
|
| Why the hating on nerds?
| amrtn wrote:
| This is one of the key ideas behind the book Never Split the
| Difference by Chris Voss [1]. I found the book quite enlightening
| if you peek through all the hostage negotiation stories.
|
| 1: https://www.goodreads.com/book/show/26156469-never-split-
| the...
| justinlloyd wrote:
| Every time I negotiate a job offer I use something like "two
| hundred and sixty two thousand and seven hundred dollars as my
| final figure" or "You'd need to increase that compensation by at
| least nineteen thousand four hundred dollars."
|
| The precise number indicates confidence in my research and it
| gets past the other person's resistance point. They focus on the
| weird number rather the actual round amount. "And four hundred
| dollars? _laughs_ I 'm sure we can do that."
|
| This is also a stronger negotiation tactic than asking for the
| whole amount. They offer 180k but you really want 210k? "To make
| me feel comfortable I'd need to see that number adjusted by
| thirty four thousand and six hundred dollars."
|
| I am on the fence about numbers that are alliterative. They sound
| good, but they let people latch on to the sound which you don't
| want. You want them focused on the smaller number and get them to
| say "yes" to that, because then their brain won't let them say
| "no" after they've thought about it. In their mind, they are
| committed to that course of action then.
|
| Also works for buying anything that you have to haggle over, like
| antiques, like the glass fronted antique cabinets we want. Four
| of them. $11,200 in total according to the ticket price. "Would
| you be willing to throw in all four for $8,760?" Slaps hand on
| desk as I say the final number. Sold! Lowest they could go was
| $10,500 just moments before.
|
| Works every time, ninety percent of the time.
| triyambakam wrote:
| Can you explain alliterative numbers?
| justinlloyd wrote:
| I don't want thirty-three-thousand dollars.
|
| I want thirty-two-thousand and nine-hundred dollars.
|
| I want thirty-four-thousand and one-hundred dollars.
|
| The human brain is good at picking up on alliteration, you
| don't want them focusing on the alliterative number, you want
| them focused on the smaller "hundred dollar" number.
|
| Unless your hundred dollar number is alliterative. I want
| thirty-four-thousand and twenty-two dollars. But generally I
| only use that when buying antiques.
| mywittyname wrote:
| I assume they mean numbers that form an alliteration when
| spoken.
|
| So Three Hundred and Twenty-two Thousand, Four hundred Fifty-
| Four.
| sicromoft wrote:
| > Works every time, ninety percent of the time.
|
| ITYM 91.4% of the time
| justinlloyd wrote:
| A recent study shows that made up statistics are more
| believable if you use a very precise number. And emphasize
| the word "point."
|
| Another study I read some years ago that I can probably never
| find again, but I am sure you are already aware of because
| you seem interested in this sort of thing, showed that by
| quoting the p value as less than 0.1% added unsubstantiated
| authority to the numbers.
|
| Anecdotally though I prefer putting the statement about the p
| value before the statistical number.
|
| Some guys out of Harvard, for their final year thesis that
| got some massive government grant demonstrated that
| bequeathing knowledge on the other person in the form of
| positive attributes, such as already having read a study,
| increased the chance that your statements would be believed.
| Especially if you use mirroring and nod as you are saying it
| so that they nod, and thereby agree, along with you.
|
| Also, throwing in the fact that you personally disagree with
| the study you read, or point out that you think the
| methodology employed had some flaws, or that the results were
| not as conclusive as the authors claim, adds even more
| authority to your citing of the study.
| syngrog66 wrote:
| related phenom: whenever I see something that is retail priced at
| $X.99 I can assume that price was not driven entirely by
| organic/natural/production/COB input factors, but rather a
| psychological one. and thus they are either overcharging or
| undercharging.
| troelsSteegin wrote:
| The idea is that the bidder's precision signals confidence, and
| that low confidence signals amenability to negotiation, and that
| negotiation leads to poorer outcomes for the bidder. The HBS
| paper they cite on M&A [0] is most interesting, to my view, in
| the sense that both players in the M&A "game" are presumably
| quantitative. One would think a social psychology effect would be
| less so in a game between quants, but their interviews suggest
| perceived confidence does matter. The precision signals that the
| bidder is confident pricing and negotiating analytically.
|
| The thing I am curious about in [0] is that they report the bid
| price per share, and not (unless I missed it) the asking price. I
| don't know how M&A "works". If you and I are both estimating the
| value of a good, if our estimates are close it's one thing and if
| they are far apart it's another. Are rounders losing because
| their estimates are less accurate, relative their counterparty's?
|
| [0]
| https://www.hbs.edu/ris/Publication%20Files/16-058_27d73983-...
| runarb wrote:
| > If you and I are both estimating the value of a good, if our
| estimates
|
| > are close it's one thing and if they are far apart it's
| another. Are
|
| > rounders losing because their estimates are less accurate,
| relative their counterparty's?
|
| I belive it is normally the one with the most optimistic
| evaluation that wins. It is called "winner's curse":
| https://en.wikipedia.org/wiki/Winner%27s_curse
| bumby wrote:
| > _One would think a social psychology effect would be less so
| in a game between quants_
|
| Is the presumption that a "quant" bases their decision on logic
| alone and that's why they wouldn't be susceptible so social
| psychology? Maybe someone with more background can elaborate
| but I think behavioral psychology might refute that assumption.
| dmurray wrote:
| > I don't know how M&A "works".
|
| In general it's the buyer who names a price first. Take the
| current Twitter acquisition, the board weren't trying to sell
| the company at all and Elon Musk made an unsolicited bid of
| $54.20/share.
|
| Other times the board may be actively looking for a buyer and
| have a price in mind, but it will still typically be up to the
| buyer to propose a deal. Not least because the number isn't the
| only thing being negotiated: the buyer will likely have a range
| of stipulations or conditions attached to the bid so every bid
| will look different.
| vasco wrote:
| > One would think a social psychology effect would be less so
| in a game between quants
|
| One would, but the little I've seen & heard about due
| dilligence around M&A (and startup investments for that matter)
| tells me it's nothing close to "quant". People decide they want
| to buy something, and then try to get it for a good price, and
| try to have it so that due dilligence works to reduce the
| purchase price, while not actually finding anything to block
| the deal. Perhaps in public company acquisitions there's more
| sophistication, but I really doubt that.
| rapht wrote:
| > People decide they want to buy something, and then try to
| get it for a good price, and try to have it so that due
| dilligence works to reduce the purchase price, while not
| actually finding anything to block the deal. Perhaps in
| public company acquisitions there's more sophistication, but
| I really doubt that.
|
| That's indeed how it works in my experience. Thay's also why,
| as a seller, you want to invest a lot of time making sure
| that the due diligence scoresheet will be as clean as
| possible - because then, there can be no mechanical way for a
| prospective buyer to lower the price: only their belief
| against that of other prospective buyers...
| noduerme wrote:
| I took this to apply to common things like buying a house,
| not M&A, but I think when you get a little emotionally
| invested in buying something the same concepts apply.
| Specifically, there's a phase where you've decided you want
| it already, but now you want to get the best price possible.
| The people selling it know you already want it, so they have
| all the leverage unless you're completely willing to walk
| away. In this scenario, setting an arbitrary target price
| makes sense, but only if you're completely unwilling to
| negotiate.
| xenadu02 wrote:
| > People decide they want to buy something, and then try to
| get it for a good price, and try to have it so that due
| dilligence works to reduce the purchase price, while not
| actually finding anything to block the deal
|
| Here's a sales secret: this is how most people and businesses
| buy things most of the time. Key stakeholders (which may not
| be the big boss) decide they want something then find reasons
| to justify it. They'll only abandon the deal if there are
| true blockers either on price or features. And by "big boss"
| that can be a parent, spouse, Director, CxO, Board, etc. The
| buyer decides they want a thing and will set about convincing
| whoever needs convincing. The more you can make them engage
| emotionally the harder they'll go on securing approval.
|
| If you're a startup selling to companies have one or two
| impressive "wow" features to make people decide emotionally
| they want your product, even if they don't seem like
| important "bread & butter" core features. It makes the rest
| of the process a lot easier.
|
| Same goes for selling to consumers or even app
| videos/screenshots: sell people on your product emotionally
| within the first 5 seconds if you can.
| JumpCrisscross wrote:
| > _it 's nothing close to "quant"_
|
| This is accurate.
|
| For public companies, the quant part has been calculated by
| the market. Everything that remains is, almost by definition,
| in the realm of the irrational, unknowable and/or political
| (usually at the Board level, though government factors could
| also be involved).
| sitkack wrote:
| > quant part has been calculated by the market
|
| And then you go on to say "everything that remains is ...
| in the realm of the irrational", everything you have laid
| out is in the realm of the irrational. Including the
| market.
| skriticos2 wrote:
| Well, the market does follow a set of rules (buy-sell
| pressure), but it's not necessarily reflective of actual
| value of a stock. More a heard consensus (which is why we
| get bubbles).
|
| The other side is also not necessarily irrational, but
| much less deterministic. For example, there is the
| question if the board even wants to sell, if they like
| the potential buyer, if they have a vision for the
| company that aligns with the buyer and some non-
| tangibles. Charisma projection and speech-craft
| definitely has an influence too, as has track record.
|
| The more factors are in alignment with the board, the
| closer the price is to the stock value. The more hostile
| the negotiation, the more it moves away.
| skriticos2 wrote:
| PS: in the case of Musk and Twitter, which I believe
| started this discussion..
|
| It's Musk, so you can throw out the book. He just takes
| the stock value and then tweaks it so that the offer
| contains 420 because obviously that's his shtick since
| some time.
|
| Wonder if the SEC will ever live that one down.
| JumpCrisscross wrote:
| > _Musk, so you can throw out the book_
|
| Musk's Twitter takeover is a textbook LBO transaction.
| The negotiations were unorthodox. But that's been true of
| LBOs since the 80s. Usually the bankers were the ones up
| to the antics; this time it's the principal.
| bjelkeman-again wrote:
| LBO, Leveraged Byout. I had to look it up. "A leveraged
| buyout (LBO) is the acquisition of another company using
| a significant amount of borrowed money (bonds or loans)
| to meet the cost of acquisition."
| spoonjim wrote:
| Textbook except for the size of course. Very few LBOs are
| above $5 billion.
| JumpCrisscross wrote:
| > _it 's not necessarily reflective of actual value of a
| stock_
|
| An econ 101 trope about the value of stock ties it to the
| value of future dividends. This is technically correct,
| but practically useless. You don't get those dividends
| unless the Board gives them to you, and investing on the
| hope that a Board throws you candy is just a hair short
| of stupid.
|
| The real enforcer of value in the markets is M&A. In M&A,
| you become the board. If there are cash flows, you can
| take them. If there aren't, you can't. You're playing a
| game of looking for things the market and/or management
| missed or couldn't access. Furthermore, the moment that
| process starts, the moment negotiations become public,
| smart people focus on the stock to anticipate those
| terms. If they think another buyer could see cash flows
| you don't, they'll bid it up and the Board will take the
| signal (as will those other buyers and _their_ bankers);
| if they don 't, if post announcement the stock keeps
| trading below the bid, the Board will take the hint.
| JumpCrisscross wrote:
| > _you go on to say "everything that remains is ... in
| the realm of the irrational", everything you have laid
| out is in the realm of the irrational. Including the
| market._
|
| This discussion devolves into useless semantics if we
| rely on colloquial definitions. In case it wasn't clear,
| the predictable, explicable parts of a public company's
| value are generally priced in by the market. (If they're
| not, we're in a chaotic environment and nobody's doing
| classic M&A.) It's the other stuff, which we put in a
| bucket titled "irrational," M&A bankers address.
|
| This is why the cash-flow models bankers prepare are
| largely performative. Every buyer builds their own
| models. And most of the time, the market does the
| modeling for them. The part the market can't model, the
| things one seeks to do with control, is the main
| attraction.
|
| I caveated the comment because private company M&A is
| different. There, the negotiation _does_ focus on
| valuation. Quality of assets. Current cash flows.
| Strength of contracts. Discount rates tied to the actual
| cost of financing versus an MBA model. While public
| company M &A dresses financial strengths and weaknesses
| in the language of partnerships, private company M&A
| seeks to address political issues ( _e.g._ a senile
| founder with voting control) through talk of
| fundamentals.
| bombcar wrote:
| I also suspect that sometimes the bid price is a signal to
| others besides the company being bought - and a number that's
| easy to digest might help in media, etc.
| Loic wrote:
| You have exactly the same effect in play if somebody calls you
| and ask how long it takes for you to arrive to a meeting point.
| If you answer 10 minutes, it will be seen as an approximation
| between 10 and 20 minutes. If you answer 8 minutes, it will be
| considered as 8 +/- 1 minute.
|
| This is really impressive, this works each time. Especially if
| you are on ski slopes and you have two groups trying to meet at
| a given point. 10 minutes == "We can do another run or two". 8
| minutes == "We need to pay attention, they are coming right
| now!"
| gowld wrote:
| Another good approach is to explicitly say what you mean:
| "5-10min", "10-15min", or "8-10min"
| dr_orpheus wrote:
| But its hard to extend this one to prices and bids. If you
| give a range of money, people will come back and say "but
| you said you could do it for [the lowest possible number
| you gave]"
| jdavis703 wrote:
| The answer is to make it clear what the tradeoffs are.
| For example it could be more cash and less stock. Or
| lower price but longer lead time. Just offering a range
| without any other variables would be foolish, and
| complicated negotiations usually have more factors than
| just price.
| TedDoesntTalk wrote:
| Although your answer may be closer to the truth, this paper
| suggests using a fixed number not divisible by 1 or 5. So,
| for example, 6 minutes and 23 seconds.
| Eduard wrote:
| The paper doesn't make any claims regarding interval or
| ranges whatsoever, only single values.
| cwmoore wrote:
| To replace that with saying 383.512 seconds would signal
| confidence in the time of a future event, but not in a
| speaker who is scheduling a meeting with another human.
| pavel_lishin wrote:
| > _If you answer 10 minutes, it will be seen as an
| approximation between 10 and 20 minutes. If you answer 8
| minutes, it will be considered as 8 + /- 1 minute._
|
| Unless you're talking to a child who has not yet internalized
| this distinction! My kid frequently asks exactly how much
| time has passed, and I sometimes have to explain that I don't
| mean five minutes _literally_ , but figuratively.
| Terretta wrote:
| Per U.S. Census data, relatively few people have a commute in
| the 5 minute block from 25 to 30 minutes. Only 20-25, and
| 30-35. The data shows a very clear valley in the 25-30 block.
|
| Suggests people think of their commute as 20 plus a few
| minutes but rounding down optimistically, or think of it as
| almost 30 minutes rounding up angrily, never think of it as
| 27 minutes.
|
| No writeup of the commute data has mentioned this phenomenon,
| which I suspect was exactly the same thinking you describe.
| btilly wrote:
| Do you have a link to this data?
| osrec wrote:
| That's a great example, with the arrival time estimates. I
| wonder whether this effect itself would diminish as more
| people get to know about it...
| mbreese wrote:
| And yet, how often are prices at a store still quoted as
| $4.95? or $10.99? We all know what the psychology of
| pricing is, and yet it still persists. People are strange
| and illogical creatures.
| dymk wrote:
| Those are "round" numbers by social convention, and our
| psychology rounds them down.
| iso1631 wrote:
| I think I automatically round 10.99 to 10, 9.99 to 10,
| 4.95 to 5, etc.
| V-2 wrote:
| The first case is bizarre to me, unless that's a typo
| dvtrn wrote:
| Keeping with the arrival time estimate, and I'm not sure if
| this answers your question
|
| But I live in a very dense city (Chicago), it's become
| almost "set your watch to it" reliable that not only are
| estimates more reliable from friends who live here when
| they say "I'll be there in 8 minutes", they're also
| seemingly more likely to offer such a precise estimate
| because they know the area, light timings, and traffic
| patterns and that certain kind of behavior found among
| drivers in this city.
|
| Compared to when I have friends from out of town renting a
| car they'll tell me "GPS says we'll be there in 10 minutes"
| I instinctively add another 10 and it's never failed that
| they'll show up and go "that was a long 10 minutes!" And I
| just smile.
| hinkley wrote:
| I lived in a part of town that was in the process of
| infill so a lot of people "knew" it without really
| knowing it.
|
| It was practically a given that the first time someone
| visited they would arrive 15-20 minutes later than they
| estimated. It seemed like an area without a lot of
| traffic but it was in that uncanny valley where there's
| enough traffic where you catch a lot of lights, and you
| aren't turning right on red because there are people in
| front of you, and you may or may not make the left turn
| light on the first cycle.
|
| Also the whole city is so tuned for one direction of
| traffic that it takes longer to go across the narrow
| dimension than the long one.
|
| There was a movie theater that I found I could reliably
| get to faster on a Friday evening if I drove five blocks
| past it and doubled back, the lights were that screwed
| up. 15 blocks faster than 5.
| jhgb wrote:
| ...or knew about octal numbers. (Does it even work on old
| Unix people?)
| t_mann wrote:
| The way M&A usually works is that all sides have
| bankers/advisers who run Excel spreadsheet calculations that
| come out with different precise numbers depending on a couple
| of scenario parameters. Those are put on PowerPoint slides and
| presented to management. The decision whether to go with one of
| the precise numbers (or some aggregate thereof), or some close
| by round number has more to do with bidding tactics, game
| theory and psychology, so I think this research actually quite
| interesting.
|
| If you're a manager involved in some bidding process, what this
| article is telling you could be somewhat loosely rephrased as
| "use the Excel numbers rather than the ones that stuck in your
| head after the presentation", which is interesting advice.
| gowld wrote:
| If your Excel is done properly, you wouldn't have the sigfigs
| for a precise number.
| t0mas88 wrote:
| I've seen a few M&A experts run their spreadsheets and then
| the negotiations happened. In reality 90% of the outcome was
| determined by how competitive the bidding was and how willing
| the target company seemed to walk away. All spreadsheets went
| out the window in the first phase.
| noduerme wrote:
| >> If you and I are both estimating the value of a good, if our
| estimates are close it's one thing
|
| Yeah, if I say EUR193,345 and they say EUR1 million, that last
| five euro would look a little stupid. This is a scenario where
| already being close to knowing their closing figure is
| everything.
|
| The proper analysis here would be: What's the chance you get
| your <1% edge versus losing a deal by being stuck on a number
| too early?
| [deleted]
| m3kw9 wrote:
| Like how Elon Musk bid 54.20 for twitter?
| prasadjoglekar wrote:
| I think that was as much a 420 reference as an un-rounded
| price.
| londons_explore wrote:
| And rounding to the nearest cool reference is just as bad as
| a round number according to this paper...
| ryeights wrote:
| I would argue it might help the buyer, if the seller
| believes they're committed to the joke...
| lvl102 wrote:
| I hate these hypotheticals on negotiations. They don't work
| unless you come across a "rational" player and the world is full
| of irrational people. For example, one lowish starter bid could
| cut you out of the whole process. Now what? You followed a stupid
| MBA advice and you shot yourself in the foot. Great job!
| xadhominemx wrote:
| Sounds like you could use some MBA coursework
| lvl102 wrote:
| Sounds like you could use some game theory lessons.
| matwood wrote:
| This strategy works because people are irrational. The round
| number vs. not round number are not that different, but they
| are perceived differently b/c we're all a bit irrational.
|
| Pricing is a tricky process of course, but you also shouldn't
| be over paying or under charging if selling. It's perfectly ok
| to get cut out of the process in those cases.
| Zenbit_UX wrote:
| I personally think it's rational to perceive a round number
| and a precise number differently. I suggest the problem isn't
| that we're all a bit irrational, but that we try to apply
| reason to an irrational process.
| simmerup wrote:
| You have to be willing to walk away to get a good deal. If
| you're not willing or can't take the risk then these strategies
| aren't going to be in your interest
| the_gipsy wrote:
| There is information asymmetry in negotiations, you should try
| to take advantage of it, but it's never a certain science.
| 10x-dev wrote:
| Anecdata: I bid 90% of asking price on a house a month ago.
| Owner got offended (as I was told by my agent) and didn't
| counter. He then lowered the asking price to 93% of the
| original. Still didn't counter even though his new asking price
| wasn't far from what I had offered initially. House is now
| pending.
| mhb wrote:
| I think this idea of a seller being "offended" is far more a
| fiction in a buyer's mind than actual reality. Think about
| when you are selling something. Does a too low initial offer
| offend you and make you unable to evaluate a more reasonable
| subsequent offer by that person?
| [deleted]
| d--b wrote:
| Mmh it really depends on the situation. The apartment I paid was
| listed at 985kEUR. High confidence? Maybe...
|
| I made an offer at 800kEUR. The broker literally insulted me. We
| settled at 825k.
| moomin wrote:
| I wonder if the markets realized that "54.20" was, in fact, a big
| round number.
| monktastic1 wrote:
| Tangential, but it bothers me that the technical definition of
| "precision" is often at odds with its common usage.
|
| Someone who is very precise in their measurements and measures
| Mount Everest to be 29,000 ft has a figure that is less "precise"
| than that of someone who is sloppy and arrives at 29,001 ft
| (though both are, of course, less precise than the person who
| comes up with 29,000.482712...).
|
| https://simple.wikipedia.org/wiki/Precision_(numbers)
| anonu wrote:
| This reminds me of one of my favorite websites:
| https://tylervigen.com/spurious-correlations
| ryan_j_naughton wrote:
| There is a confounding variable (omitted variable bias) here that
| could explain the entire thing, namely, those who used precise
| numbers likely ACTUALLY DID use a model and/or more quantitative
| analysis to determine that price.
|
| Similarly, those who chose hole number prices likely did NOT use
| a model to determine that exact price (as the odds of a model
| resulting in a whole number price is extremely unlikely).
|
| Thus, you cannot disentangle the effects of the precise bidders
| actually being more quantitative from the perception of them
| being more quantitative by the seller.
|
| To properly disentangle this, you would need an experiment (or
| potentially quasi-experiment) where you randomize either adding
| some noise to the bid for some bids and rounding other bids to
| whole dollar amounts.
| danuker wrote:
| Using a model is risky, because there are tons of things you
| have to price.
|
| Is it noisy outside? Is it warm in the winter? summer? Does
| sunlight pose problems (too much? not enough?) What taxes are
| there? Is there an HOA? Is the town growing? Is it in a
| walkable neighborhood? What amenities are nearby? What color is
| the counter?
|
| Insufficient models was the bane of Zillow, which paid for it
| dearly.
|
| https://www./live/2021/11/02/business/news-business-stock-ma...
| vivegi wrote:
| Once upon a time the company I worked for had a client, a private
| company that we provided business services. Lets say we provided
| 5 different services for this client and had been doing so for
| several years and our client was quite satisfied with our
| services. The client was acquired by a PE firm and one of the
| first things that the acquiring PE firm did was to get all their
| vendors to bid in a realtime reverse auction. It was a standard
| process that the PE firm executed on all their portfolio
| companies post-acq.
|
| Of the 5 services that we provided to the client, there was one
| service that was very demanding. Suffice to say, it took us
| several years to get it off the ground and stabilize it. All that
| knowledge and experience made us a valuable extension of the
| client. We both had the battle scars. This service was only 10%
| of the total billing from this client, but very high maintenance,
| highly visible and operationally very challenging.
|
| When it came to the reverse auction, we dropped our price on this
| service marginally and held our price on all other services.
|
| A feature of the realtime reverse auction was that we would know
| our rank amongst competitive bidders on where our bid stood. So,
| it was nerve-wracking to know that we are not the L1 bid.
|
| We retained all our services at the pre-bid volume levels at the
| conclusion of the reverse auction and continued to grow this
| client account for another 5+ years. While this is a single
| anecdote and may not apply in all scenarios, complex bids don't
| always come down to price.
| noud wrote:
| I bid 6793.75 euros for my new bathroom as my final offer a
| couple of years ago. You should have seen the confused face of
| the sales person.
|
| ...he accepted my offer. :)
| stavros wrote:
| He was probably confused because he was hoping for 6793.76 and
| was on the fence.
| rootusrootus wrote:
| I did something similar when selling an item on craigslist. I was
| having trouble with lowballers and flakes, so I relisted the item
| but gave it a weirdly specific price. Something like $347. Maybe
| it was dumb luck, but I had a buyer come pick it up a few hours
| later and they didn't try to negotiate down the price at all.
|
| Could've just been a coincidence. But it did get their attention,
| for sure, because after they gave me the money, they asked why I
| was so specific on the price. Got an appreciative chuckle when I
| told them the truth.
| jalgos_eminator wrote:
| That's funny because when buying things from Craigslist I try
| to round the price to an even number since the transaction will
| always be cash and few people have enough small bills to make
| change.
|
| For instance if the asking is $125, I'll offer $120 since I
| don't want to find a $5 bill or make the person find change for
| the extra $20 bill I'd have to use. I've even rounded up a few
| times to make it easy, though some people have been so
| insistent that they even resorted to giving me quarters.
| rootusrootus wrote:
| Yeah, that makes sense. If they'd have offered me a round
| number anywhere near my asking price I'd have just said yes,
| for much the same convenience reason you cited. But in this
| particular instance they had Venmo so just paid me the exact
| amount.
| bstar77 wrote:
| In the early 2000's I was planning to buy a specific car. The
| salesman told me not to even think about for getting it under
| $20k. I came back the next day and told a different sales guy
| that I wanted the car for $16,750. He came back from the
| manager's room after a minute or so and said "lets do the
| paperwork".
|
| I always wondered what part of my tactic worked the best... I
| wasn't sure if it was setting the oddly specific price or my
| terseness or maybe both.
| bumby wrote:
| I've personally had more success in salary negotiation with
| using oddball numbers. I think the presumption on the managers
| side is either 1) I have a specific offer from another
| potential employer or 2) I've calculated to the dollar how much
| I think the job switch is worth. (The latter is usually true,
| but with large error bounds).
|
| I wonder if the second salesman assumed you had already shopped
| around and found a car of similar price to your offer.
| bstar77 wrote:
| The car was a Honda Insight... the original one from 2001, so
| there was nothing else like it. I think they probably felt
| only select customers were going to be interested in that
| niche car and that I had probably done my research so best to
| just accept and get rid of this weird inventory.
| bumby wrote:
| Sorry, I meant a similar car of the same make/model. I.e.,
| another Honda Insight from another dealer.
|
| FWIW, I've always loved the Insight and wish they made more
| of them :-)
| bstar77 wrote:
| Me too, getting 90mpg was no joke. I would fill up once a
| month with a 2 hour daily commute.
| theonething wrote:
| I'm car shopping now but it's the worst time to get one. My
| wife's car is dying so we have no choice.
|
| My friend who's family runs a dealership says that just getting
| MSRP is good right now. In my negotiations I got MSRP plus the
| stupid dealer installed "options" which apparently are
| mandatory now. They were asking $34,000 out the door total
| price and I got them to knock off $2000.
|
| Did I get a good deal? Who knows? I need a car and I'm getting
| it.
| stevehawk wrote:
| "Good" is such a relative term right now. It's really more of
| a "You didn't get screwed." Everyone is paying dealer options
| unless they're buying one of the few cars that isn't selling.
| Same with MSRP if not MSRP + Dealership Owner's Next Vacation
| markup.
| jacquesm wrote:
| I found buying new cars is an excellent waste of money. Young
| cars repossessed or returned early from a lease are good
| value, as are cars that are about 5 years old with a hair
| over 100K miles on them. That psychological 100K is enough to
| knock a good bit off the value.
| mikemac wrote:
| Car dealerships are a black box; feel like so much depends on
| timing and where they are with their sales numbers for the
| month.
|
| I tried to lease a car last year and after some research knew
| what was a fair price for a well stocked model; when I
| suggested a range one sales manager laughed at me.
|
| I emailed a finance manager at a different dealership with
| exactly what I wanted and told him I could get all of the
| paperwork done in the next hour if it was a good fit. They
| agreed and dropped the car off in my driveway a few days later.
| seabird wrote:
| That's just a car dealership. They're not necessarily out to
| screw you, but they _are_ trying to make as much money as they
| can, so you can 't (and you didn't) let yourself get pushed
| around. The first salesman thought you would buy at $19-20k,
| and the second one didn't (or he just wanted the sale, or his
| boss told him to just get rid of the car, or he wanted to scalp
| the sale from the first guy, etc).
| mindvirus wrote:
| This reminds me of a story of Mount Everest - apparently the
| people who did the first measurement had it come in at exactly
| 29,000 feet - so they said 29,002 to make it sound like they
| weren't making it up. Official measurement now is 29,032 feet.
| thehappypm wrote:
| It's getting taller too which is crazy
| 988747 wrote:
| I cannot find the reference right now, but I read somewhere that
| when people are on vacation they prefer round prices so they
| don't have to count change. So, if you are running a gift shop in
| some popular tourist destination pricing something $5 is better
| than pricing it $4.95.
|
| Edit: apparently it is not just tourists: https://www.strategy-
| business.com/blog/The-Psychology-of-Pri...
| pflenker wrote:
| This advice is also part of the book "Never split the difference"
| by Christopher Voss, a highly recommended book for anyone looking
| to improve their negotiation skills.
| leeoniya wrote:
| i found a lot of his advice somewhat silly.
|
| why would you come up with some to-the-$1,000 asking price in a
| salary negotiation rather than just asking for 30% more than
| you'd be okay with?
|
| i know he has another version where at some point in the
| negotiation (rather than the beginning), you whip out some very
| precise number, but that would immediately strike me as a
| psychological play rather than the honesty/thoughtfulness it's
| designed to convey.
|
| in a different situation it's certainly more effective, like
| when requesting a budget/expense for a specific project, since
| it signals you've done the math and not just throwing inflated
| approximations.
| asurty wrote:
| I think the core ethos of the book is every negotiation is
| different and so each tip/technique is just that - a
| tip/technique you can add to your tool belt and use when the
| context lends itself to it.
|
| The book also mentions anchoring should usually be avoided in
| negotiations and instead it recommends you focus on the non
| monetary value points each party can exchange.
|
| There is actually a section on negotiating salary and IIRC it
| recommends you provide a range where the bottom of the range
| is where you are hoping to land.
|
| So you are correct - I would never say in a salary
| negotiation that I need an exact dollar amount as it might
| make me love petty unless I prefaced it with 'I have a family
| to feed and a roof to put over our heads'.
| pflenker wrote:
| I was able to successfully navigate tricky negotiation
| situations using his advice, but salary increases were never
| a part of it. I believe salary increases should reflect
| professional skills and not negotiation skills, and I avoid
| companies which reward negotiation skills with higher salary.
|
| I have always used the "imprecise offer" somewhere in the
| middle, and it usually worked out great.
| Jiro wrote:
| >I avoid companies which reward negotiation skills with
| higher salary.
|
| This is like saying "I avoid companies run by humans".
| BeetleB wrote:
| Terrible book with some gems:
|
| https://news.ycombinator.com/item?id=21769264
|
| https://news.ycombinator.com/item?id=19059590
|
| https://news.ycombinator.com/item?id=25309966
| goostavos wrote:
| I thought the book was great! It's also the only book on
| negotiation that I've ever read (aside from Art of the Deal
| out of curiosity, which isn't actually about negotiations at
| all!), so take my views with a grain of salt.
|
| If you ignore the stuff your linked comments complain about,
| which is largely him having an obnoxious writing style and
| literal too-cool-for-(Harvard)-school attitude (them nerds
| don't know nothin'!), I found tons of the actual content
| immediately applicable with lots of return.
|
| The thing I absolutely loved about the book was shifting your
| mindset away from negotiations being these big scary
| stressful standoffs with winners and losers, and towards them
| being lighthearted, possibly even fun(!) shared problem
| solving sessions. That mental shift, and having a box of
| tools to use, makes navigating tricky situations so much
| easier.
|
| It also make me look forward to previously stressful
| situations. For instance, I recently bought a new car, which
| is a process I usually loathe. However, using all the tricks
| from the book, I was able to negotiate down a crazy amount
| off our car with the main approach being the "how can I do
| X?" from the book. There was some back and forth, some
| huffing and puffing about how it couldn't be done ("we're
| already taking a loss on this!"), but eventually, after
| numerous showy checks with the management, we agreed on a
| price. I legit had a blast the whole time cause the mental
| state the entire time was "can we solve this problem
| together?"
| kqr wrote:
| Another thing in that book that's helped me is the suggestion
| to make your first bid 65 % of the maximum price you're ready
| to offer. Second bid 85 %, then 95 %, then your maximum offer.
|
| It's not that these numbers are magical in any way, it's just
| that for me it's convenient to have a rule ready so I don't
| have to expend mental energy on what numbers to say, and I can
| instead use that energy on coming up with how to present them.
|
| Knowing the steps I'll take to the final offer ahead of time
| also makes me slightly more comfortable entering such a low bid
| to start out with.
| qznc wrote:
| "What are your salary expectations?"
|
| "$153,845.64"
|
| Anybody ever tried that?
| exegete wrote:
| From the article:
|
| >That said, he warns that a bid too precise may make the bidder
| look suspicious, or even ridiculous, to the recipient. Bidding
| $1.03 million for a house is one thing. Bidding $1,033,235.83
| is another.
|
| >If a bid is too precise, it may strike as strategic to the
| recipient, rather than being driven by superior information,"
| Keloharju says. "This may lead the recipient to rethink whether
| the bid is really informed."
|
| So I think $153k is an ok level of precision. $153,900 is
| starting to be "too precise". $150k is definitely too round.
| It's all a personal judgement call on how precise one should go
| but I think it's easy to see what is too extreme (with cents in
| it in this case).
| jghn wrote:
| Not quite,but after reading about this effect years ago I
| started asking for $153,000 instead of $150,000 or $155,000. I
| can never know for sure that this is the reason I got what I
| asked for, but I've always gotten what I asked for.
| bumby wrote:
| Not to the penny, but usually to a non-normative hundred. So
| maybe something like $153,800 instead of $150k. That has worked
| surprisingly well for me (someone who didn't know how to
| negotiate well early in my career and it probably set me back
| quite a bit).
| FatalLogic wrote:
| That extra $0.64 could lose you the job, because you'd appear
| to be insane and obsessed with tiny unimportant details
| op00to wrote:
| My old boss loved to calculate our salaries (increases always
| in percentages) so the actual dollar amount would contain our
| birthday or be $123456 or whatever.
| pc86 wrote:
| Oh so they were _actually_ insane, got it :)
| op00to wrote:
| His reasoning was 5% is just as arbitrary as 5.02% or
| whatever he would do. Also it really pissed off finance,
| which you rarely get to do with impunity. I miss him. My
| new boss is more concerned with my haircut and beard than
| anything else.
| glouwbug wrote:
| Then shake a leg and get a 6% promotion
| Pete-Codes wrote:
| yeah, birthday date is a clever trick to add in a number
| op00to wrote:
| Sadly I wasn't born on 99/99/99.
| stavros wrote:
| It's not too late for that!
| nonameiguess wrote:
| We're currently on Kubernetes version 1.23.4 and I'm trying
| _very hard_ to convince people we can 't upgrade until it
| hits 2.34.5.
| contravariant wrote:
| Looks like you were too late to convince Kubernetes to
| deviate from semantic versioning and instead move to
| Knuth versioning with the version getting asymptotically
| closer and closer to 100/9^2.
| tsukurimashou wrote:
| I will
| andi999 wrote:
| add one more digit. Every ten years they need to pay another
| cent.
| Sankra wrote:
| Not with that exact number, but on my last job change my demand
| was equally precise. Although we reached an agreement, my new
| boss said that this was "an oddly specific number" and she'd
| never experienced that before.
| noirbot wrote:
| Did you have a particular reason for requesting that number?
| Or just a bargaining tactic. Would you have been ok if they
| just rounded it to a clean number?
| MauranKilom wrote:
| https://xkcd.com/2597/
| dazc wrote:
| There was similar thinking in retail not so long ago when prices
| started to change from something like 3.99 to 3.77, for example.
| I don't see this so much now which suggests it didn't work out as
| expected?
| NikolaNovak wrote:
| Some retailers in Canada use the two penny/cent digits as a
| code. I.e. Something like.99 is regular price,.77 is manager's
| special,.88 is corporate sale.
| Frost1x wrote:
| This happens in the US as well from what I understand and I
| always found it an interesting testament to margin size of
| the product when you're selling something at a mass scald and
| can afford shaving 10 or 20 cents off the product price
| point, overloading the value to codify it internally.
|
| Seems like there are cheaper ways, but maybe the price cuts
| back on secondary labeling or sell association, ultimately
| saveing personnel time, which ultimately costs less than
| those expenses.
| dr-detroit wrote:
| gumby wrote:
| Sometimes shops use the low order bits to encode metadata, e.g.
| "this is the 20% off price" or "this is ineligible for the sale
| (discount) going on now".
|
| Thus $15.20 vs $15.40
| DFHippie wrote:
| I was at a craft fair in Tennessee once long ago. People were
| selling hand-turned bowls, fountain pens, textiles, pottery,
| etc. There was one seller whose products were quite different:
| bowls and things roughly hewn out of wood with the bark on and
| such. I think he styled himself as, and perhaps was, an
| Appalachian mountain man from eastern Tennessee (this was in
| Nashville, which is a bit like Las Vegas). I wasn't in the
| market for what he was selling, or really anything, but another
| oddity of his goods was the precision of their prices: $41.13
| or $15.02 and so forth. Everything else had a price that ended
| in 0, 5, or 9, and generally it was a number of dollars with no
| cents, maybe just two significant digits. This gave me the
| impression he had very exact knowledge of his own costs and
| profit margin but very little sense of the pricing customs of
| craft fairs, or really pricing in general. Anyway, this is just
| an anecdote. His pricing didn't seem to be making him more
| prosperous, but he is one of the few things I remember from
| that day.
| Archelaos wrote:
| In 1985 I visited the Pergamon Museum in East Berlin. The
| price for a pot of coffee in the cafeteria was something like
| DDM 2.67.
| mellavora wrote:
| Isnt' DDM 2.67 just 1.00 in Ishtar Crowns? I'm sure they
| were just trying to maintain consistency across the museum.
|
| It's a great museum by the way.
| foodevl wrote:
| Maybe the prices were calculated to make post-sales-tax
| amounts round numbers? That's been the case when I've seen
| weirdly precise store pricing in the past.
| bombcar wrote:
| Sam Walton hated .99 for some reason, so Walmart prices are
| never that.
| rascul wrote:
| That may have been true at one time but nowadays there is a
| lot of .99 in Walmart.
| raverbashing wrote:
| Well, maybe because it's one of the lowest forms of making
| stuff look cheaper
|
| I'd wish Apple cut the crap on that, it makes them look like
| you're buying stuff from a used car lot.
| bombcar wrote:
| Which is strange because you'd think the $1000 would make
| it look like a higher class item.
|
| You'll never see decimals in a fancy restaurant for
| example.
| HPsquared wrote:
| ASDA (subsidiary of Wal-Mart) fuel stations in the UK always
| have the fuel price ending in .8 (e.g. 175.8p per litre)
| while pretty much EVERY other fuel station always has prices
| ending in .9.
|
| It gives a feeling that they're slightly cheaper than the
| competition, I think. Even if the more significant digit is
| more expensive sometimes, people don't remember that part as
| much because it varies from day to day.
| mytailorisrich wrote:
| The problem at the moment is that '175'... I don't think
| people bother too much about .8 vs .9
| twelve40 wrote:
| ...until someone else comes along and offers .7 : ) so the
| race to the bottom begins
| hmate9 wrote:
| It's not a race to the bottom because what Asda is doing
| is pricing it 175.8 when others price it 174.9
| Mordisquitos wrote:
| I assumed they meant a race to the bottom in terms of
| decimal digits only. Another petrol station could price
| it at 175.7, or maybe even 176.7 if the illusion of being
| cheaper than ASDA still works.
| Mordisquitos wrote:
| And, once the race to the bottom reaches _.0_ , the
| petrol station operator that stuck to _.9_ is back in the
| lead, again regardless of the significant digits! It
| would be a bit of a retail version of the Shepard tone:
| https://en.wikipedia.org/wiki/Shepard_tone
| munchenphile wrote:
| https://m.youtube.com/watch?v=rnso4nfdM9w
| ak_111 wrote:
| You tend to see this a lot in LinkedIn profiles: "Increased CTR
| by 142%".
| frereubu wrote:
| Surely this has something to do with the anchoring effect:
|
| - If you offer PS210,000, it's a signal that you're looking at
| increments of PS10,000.
|
| - If you offer PS211,000 it's a signal that you're looking at
| increments of PS1,000.
|
| - If you offer PS211,000.01 then it signals that you're taking
| the piss.
|
| I'm sure there's something about confidence and accuracy in there
| too, but I would expect anchoring effects to be stronger in those
| contexts.
| t_mann wrote:
| I guess a "precise" number would be more something like
| 210,980.55 than 211,000.01
| jjri wrote:
| Don't forget, PS210,999.99 is a bargain.
| whitesilhouette wrote:
| And something to do with taxation.
| whoopdedo wrote:
| When you show me the price in GBP I assume the tax has
| already been added. That's only a thing for the US.
| thereddaikon wrote:
| In the US, sales tax is handled on the state level not
| the national level. So it varies wildly.
| afiori wrote:
| the store is able to compute it on the fly at the
| register, so they can also print price stickers* (for
| products that don't have the price on them)
|
| showing prices without vat should be banned for sales
| that are never business-to-business.
|
| * unless they also vary wildly by the week
| bialpio wrote:
| To expand on that: it's on state, county, and city level
| - I believe all those jurisdictions can introduce a sales
| tax.
| [deleted]
| clb92 wrote:
| Or if it's business-to-business, at least if the UK is
| anything like here in Denmark in that regard.
| ouid wrote:
| It's a heuristic about the complexity of the number. If I have
| some idea bout the ways that you can come up with numbers, then
| the vast majority of numbers of low complexity were arrived at
| with short programs, or through rounding. Short programs tend
| to be heuristics themselves, and indicate estimates, and thus
| wide implicit error bars. Often even wider than the reported
| significance.
|
| As long as there are still people negotiating this way, then it
| is rational to assume that people negotiate this way some
| proportion of the time and account for it in your own strategy.
| It's probably not stable in general.
| frereubu wrote:
| I get what you're saying, but my point would be that the
| rounder the number you use, the more you're anchoring your
| negotiation to the rounding point, and the metric being used
| here seems to be the outcome of the negotiation. If someone
| says their price is PS45,765 then the anchor is to the single
| pound. If someone says their price is PS45,000 then the
| anchor is to PS1,000s. I think there are both things -
| complexity and anchoring - at work, but I'd say the anchoring
| to the rounding point is actually most salient here and don't
| think it's necessarily much to do with perception of
| complexity, as attractive as that might be as an explantion.
| acchow wrote:
| The study looks into 'investors who offer "precise" bids for
| company shares'
|
| But then the article opens with 'anyone negotiating to buy a car,
| a house, or even a company'
|
| Seriously?
| coward123 wrote:
| I work in a field where we are negotiating over price daily. We
| often are using "weird" numbers because we know it will push our
| price just over a competitors, and because the sellers will find
| our number psychologically "interesting" over those competitors.
| We also make sure our escalation numbers are not "normal" for the
| same basic reasons. It has worked well for me, though I'm not
| sure it would make as much of a difference if my competitors were
| the kind of people who read articles on hbs.edu.
| pessimizer wrote:
| The same thing is true with lists (listicles) of principles or
| rules that are even (or lucky) numbers. If somebody is advocating
| 5, 7, 10, or 20 principles for doing something, I assume at best
| that they added or dropped marginal ones to get the round number,
| and at worst that they just had a remit to do 10 rules for
| _something_ and were just winging it.
| galoisscobi wrote:
| Came across 37 signals yesterday (https://37signals.com/) which
| might be a nice exception to this.
|
| I say might because they count from 0, so technically it's 38
| signals ;).
| troupe wrote:
| The funny thing is that the name 37 signals comes from a
| count of the signals from space have unexplained origins. So
| they picked their name long before they came up with that
| list that just happens to fit. (With one extra by starting at
| 0)
| gowld wrote:
| > that just happens to fit
|
| pretty sure they forced it to fit, probably by padding the
| list.
| pessimizer wrote:
| More likely by truncating the list, since they felt they
| had to sneak one more in at zero.
| pessimizer wrote:
| A nice _example_ of this. They didn 't bid a round number, so
| it seemed like they knew what they were talking about.
| galoisscobi wrote:
| Ah, that's right, thanks for pointing this out. I misread a
| part of your comment at first.
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