[ericb]

True. Also, I've seen a number of negotiations broken off over pride--offers were made that were deemed "offensive." Don't be misled by treating everyone as "consequentialists" or you are very likely to step on a pride booby trap and cause the other party to sever negotiations. So in a practical sense, your simplifying assumption makes a lot of sense.

[lsc]

eh, I think in this case, 'pride' is really the other party saying 'this negotiation is not worth my time'. I know a while back I got some interest in someone buying out prgmr.com. Well, I listened to them, and they wanted to offer me a years revenue. I refused, of course, and broke off negotiations, but then I did some research, and come to find out, in my industry, that's a pretty average price.

Why would anyone sell a company that's doubling every 6 months for a year's take? it seems quite irrational to me. But, like I said, it's normal for this industry. Now, knowing what I know now, my answer wouldn't change, I mean, the other party (and the market) obviously placed a dramatically lower value on my company than I did, but if I knew this was fair market value, I'd have said no to their initial feeler before hearing their offer. Of course, I'll sell, for a price... but my price is so far above the 'fair market value' of the company that for all practical purposes, you can think of me as being completely unwilling to sell.

I mean, like everyone, I have my price, but I really, really like my company; my price is a /whole lot/ higher than one year's take.

so, uh, yeah; I think a lot of times breaking off negotiations upon hearing an 'offensive' offer is the result not of a wounded pride but of a clear misunderstanding of the market value of the good at hand by one or both parties.

If I'm willing to sleep with you for a million bucks and no less, if you offer me $100, it's probably not worth my time to try to talk you up. In that case, assuming that you are unable or unwilling to pay me the million bucks, there is /no difference/ between me being willing to sleep with you for a million bucks, and me not being willing to sleep with you for any amount of money at all.

[HeyLaughingBoy]

While I can't think of an instance where I've seen this myself, I remember my real estate agent warning me about this when I was buying my first house. Some buyers will simply not consider any offer you make if your first one is so far below what they are asking that they consider it insulting.