Research conducted by Professors Malia Mason and Daniel Ames and doctoral students Alice Lee and Elizabeth Wiley found that asking for a specific and precise dollar amount versus a rounded-off dollar amount can give you the upper hand during any negotiation over a quantity.
The research looks at the two-way flow of communication between 1,254 fictitious negotiators.
The negotiators were placed in everyday scenarios such as buying jewelry or negotiating the sale of a used car. Some people were asked to make an opening offer using a rounded-off dollar amount, while other people were asked to use a precise dollar amount.
The results showed that overall, people making an offer using a precise dollar amount such as 5,015 dollars versus a rounded-off dollar amount such as 5,000 dollars were perceived to be more informed about the true value of the offer being negotiated.
This perception, in turn, led precise-offer recipients to concede more value to their counterpart.
In their negotiation scenarios, the professors concluded the person making a precise offer is successfully giving the illusion they have done their homework. When perceived as better informed, the person on the opposite end believes there is less room to negotiate.
To determine whether people make round offers more often than not, the researchers looked at the real estate market. Research done on Zillow, the online real estate marketplace, showed the overwhelming majority of displayed prices were rounded numbers, and that only two percent of people listed their homes with precise dollar amounts.
"The practical application of these findings – signaling that you are informed and using a precise number – can be used in any negotiation situation to imply you''ve done your homework," Mason concluded.
The research will be published in the Journal of Experimental Social Psychology.