Cheap Talk, Round Numbers, and the Economics of Negotiation

Matthew Backus, Tom Blake, Steven Tadelis

NBER Working Paper No. 21285
Issued in June 2015
NBER Program(s):   IO   PR

Can sellers credibly signal their private information to reduce frictions in negotiations? Guided by a simple cheap-talk model, we posit that impatient sellers use round numbers to signal their willingness to cut prices in order to sell faster, and test its implications using millions of online bargaining interactions. Items listed at multiples of $100 receive offers that are 5% - 8% lower but that arrive 6 - 11 days sooner than listings at neighboring "precise" values, and are 3% - 5% more likely to sell. Similar patterns in real estate transactions suggest that round-number signaling plays a broader role in negotiations.

You may purchase this paper on-line in .pdf format from ($5) for electronic delivery.

Information about Free Papers

You should expect a free download if you are a subscriber, a corporate associate of the NBER, a journalist, an employee of the U.S. federal government with a ".GOV" domain name, or a resident of nearly any developing country or transition economy.

If you usually get free papers at work/university but do not at home, you can either connect to your work VPN or proxy (if any) or elect to have a link to the paper emailed to your work email address below. The email address must be connected to a subscribing college, university, or other subscribing institution. Gmail and other free email addresses will not have access.


A non-technical summary of this paper is available in the September 2015 NBER digest.  You can sign up to receive the NBER Digest by email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w21285

Users who downloaded this paper also downloaded these:
Doidge, Karolyi, and Stulz w21181 The U.S. listing gap
Borenstein w21342 The Private Net Benefits of Residential Solar PV: The Role of Electricity Tariffs, Tax Incentives and Rebates
Cascio and Narayan w21359 Who Needs a Fracking Education? The Educational Response to Low-Skill Biased Technological Change
Bartlett and McCrary w21286 Dark Trading at the Midpoint: Pricing Rules, Order Flow, and High Frequency Liquidity Provision
Borenstein and Davis w21437 The Distributional Effects of U.S. Clean Energy Tax Credits
NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us