Selling the Haggle

Price haggling is widely viewed as a source of friction in retail markets: customers bear bargaining costs, and firms face operational complexity. This logic has motivated some firms to adopt fixed pricing. We show that in markets organized around personal selling, eliminating negotiation can backfire. Using lead and transaction data from a major automaker in China that introduced a one-price policy for one model while retaining negotiation for all others at the same dealerships, we find that the policy reduced sales of the targeted model and shifted demand toward models where negotiation remained available. Notably, although the fixed price was below the prior average negotiated price at most dealerships, the pattern persists within this subgroup. We argue that the \textit{process of negotiation} serves as an effective deal-closing tool for the salesperson. When this instrument is removed for one product, salespeople become less equipped to convert leads into sales and may redirect customers toward products for which negotiation remains available. Consistent with this mechanism, demand switching is larger among salespeople who relied more heavily on price discussion prior to the policy. These findings suggest that, beyond negotiation outcomes external to the firm (such as customer disutility, price dispersion, or surplus extraction), an internal organizational factor also matters when evaluating pricing regimes: the salesforce, whose ability to haggle often serves as the instrument that closes the deal.