Ethnic Buyer Bargaining Strategy Disparities

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In Simple Words

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.

Observed audit buyer groups

Tamil buyers
Lower upfront payment
Marwari buyers
Higher upfront payment
Andhra buyers
Higher upfront payment

Tamil buyers faced lower advance-payment demands than Marwari or Andhra buyers. The summary does not give advance-payment amounts or establish bargaining skill as the mechanism. Observed buyer-group comparison in scripted audits. No numerical advance payments; bargaining mechanism not established.

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Research question

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.

Participants

107 pen and stationery wholesale businesses in Chennai, India, interacted with auditors from Tamil, Marwari, and Andhra communities.

Study Design

Audit methodology using hired local entrepreneurs as buyers with standardized bargaining rules across customized and non-customized product purchases.

Results

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.

Takeaway

Standardize initial anchor offers and price counter-proposal rules across procurement teams to eliminate identity-driven negotiation variance.

Source and citation

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