Ethnic Buyer Bargaining Strategy Disparities
RCTReview
Buyers from different ethnic communities deploy distinct initial offer points and negotiation paths when bargaining over wholesale goods. These community-level bargaining strategies directly alter final settlement prices and required transaction terms regardless of seller identity.
Picture this
Imagine buyers from three neighboring towns going to a wholesale market. One group starts with aggressive low-ball offers, another accepts closer to the asking price, and a third group negotiates somewhere in between, causing each group to end up paying different average prices for the exact same goods.
What the evidence says
Buyer ethnicity significantly affected settlement outcomes: Andhra buyers paid higher final prices, Marwari buyers paid the lowest prices, and Tamil buyers received lower advance payment demands than Marwari or Andhra buyers.
- Who was studied
- 107 pen and stationery wholesale businesses in Chennai, India, interacted with auditors from Tamil, Marwari, and Andhra communities.
- How
- Audit methodology using hired local entrepreneurs as buyers with standardized bargaining rules across customized and non-customized product purchases.
What to do
Standardize initial anchor offers and price counter-proposal rules across procurement teams to eliminate identity-driven negotiation variance.
From the source
"The Andhra buyers paid more for a similar product purchase, while the Marwari buyers paid the least. There was not much difference between the advance payments paid by Marwari and Andhra buyers, but both were asked for a higher upfront payment than Tamilians."
Importance_of_Ethnic_Networks_in_Business_Transactions_in_India.pdf