New research published in the Proceedings of the National Academy of Sciences found that buyers were discouraged by slow rejections of their offers in online auctions. As a result, buyers were less likely to make counteroffers when sellers took longer to respond.
"The finding adds a new element to game theory—the scientific study of strategic interactions—by considering not just what people choose, but how quickly they choose it," said Ian Krajbich, corresponding author and UCLA psychology professor.
On eBay, sellers can list items for sale at a fixed price or allow buyers to make offers. The seller can accept or reject the offer. If the seller rejects the offer, the buyer can make another one, which the seller can again accept or reject. The process continues until they agree on a price or one of them walks away. A buyer can also discontinue bargaining and click the "buy it now" button to purchase the item for the asking price.
In some bargaining situations, decision-makers may have private plans for every contingency. When decisions must be made on the spot, bargainers may inadvertently reveal some of their private information. This revelation can influence the deal's outcome.
For example, a seller with a prepared plan can quickly accept or reject any offer. Without a prepared plan, a seller might need time to consider an offer, inadvertently revealing how attractive they find it.
The researchers hypothesized that eBay sellers who take a long time to reject offers signal that they are uncertain about whether to accept or reject. A slow rejection might indicate that the buyer's offer was close to the price the seller was hoping to get. Sellers who reject an offer quickly signal that the buyer missed the mark by a long shot.
Using data from 2012 and 2013 made available by eBay, the authors analyzed about a million bargaining exchanges in various sales categories. The researchers created eBay accounts and made thousands of offers to hundreds of sellers. Each seller received 10–20 offers for collectible cards, such as Pokémon and baseball cards.
Both the eBay and experimental data showed that sellers were slower to reject better offers. Sellers were faster to reject worse offers. The longer the seller's rejection time to the first offer, the more likely they were to accept the buyer's second offer. The finding was so strong that the researchers could predict whether a seller would accept the buyer's second offer based on how quickly they rejected the first offer.
"But what's maybe most surprising in these results is that buyers don't seem to be using this information as strategically as they should," Krajbich said. The lesson for buyers, he noted, is that they should take a slow rejection as a positive sign that they were close and make a new offer.
"But we actually find the opposite. Buyers seem to be discouraged by slow responses from the seller. The slower the sellers were to reject them, the less likely buyers were to make another offer. In fact, buyers were more likely to make second offers to sellers who had slapped them down quickly," he added.
According to the research, sellers may be driving away buyers by responding slowly. Buyers might end up paying higher prices or missing out on good deals by not following up with slow-responding sellers.
"Take a slow response as a good sign rather than a bad sign. Don't get discouraged. Don't think that the seller is lazy or just dragging you along. Instead, consider that you might have them on the hook," Krajbich advised.
The article was written with the assistance of a news analysis system.