Bargaining

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, s/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.

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

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, locals haggle for goods and services everywhere from street markets to hotels. Even children learn to haggle from a young age. Participating in that tradition can make foreigners feel accepted. On the other hand, in Thailand, haggling seems to be softer than the other countries due to Thai culture, in which people tend to be humble and avoiding argument. However, 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.

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.

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