The low-ball is a
persuasion
Persuasion or persuasion arts is an umbrella term for Social influence, influence. Persuasion can influence a person's Belief, beliefs, Attitude (psychology), attitudes, Intention, intentions, Motivation, motivations, or Behavior, behaviours.
...
,
negotiation
Negotiation is a dialogue between two or more people or parties to reach the desired outcome regarding one or more issues of conflict. It is an interaction between entities who aspire to agree on matters of mutual interest. The agreement c ...
, and
selling technique
Sales are activities related to selling or the number of goods sold in a given targeted time period. The delivery of a service for a cost is also considered a sale.
The seller, or the provider of the goods or services, completes a sale in r ...
.
Overview
By buyers
When used by buyer, the low-ball is an offer for goods or services far lower than the price the buyer is willing to pay, made in the hope that the seller will at least counter-offer a price lower than the original asking price. Sellers looking to maximize profit but expecting would-be buyers to
haggle may conversely make a "high-ball" offer and/or asking price.
By sellers
When a seller makes a low-ball offer this means an item or service is offered at a lower price than what is needed actually for the desired profit margin to be realized. The seller makes the offer with the intent of quickly raising the price in order to increase profits and/or with the intent of selling would-be buyers additional, more profitable products and services. An explanation for the effect is provided by
cognitive dissonance
In the field of psychology, cognitive dissonance is the perception of contradictory information, and the mental toll of it. Relevant items of information include a person's actions, feelings, ideas, beliefs, values, and things in the environment. ...
theory. If a person is already enjoying the prospect of an excellent deal and the future benefits of the item or idea, then backing out would create cognitive dissonance, which is prevented by playing down the negative effect of the "extra" costs.
The converse offer from a buyer, a "high-ball" offer, is an offer at a price the buyer hopes is not quickly accepted, made with the intention of being replaced with a reduced price to pressure a reluctant seller.
By taxpayers
Low-balling is also a form of
tax evasion
Tax evasion is an illegal attempt to defeat the imposition of taxes by individuals, corporations, trusts, and others. Tax evasion often entails the deliberate misrepresentation of the taxpayer's affairs to the tax authorities to reduce the taxp ...
where a filer misrepresents the amount of taxable income on a tax return. It is most common in situations where the tax authorities reasonably expect taxable income to exist but cannot, without the taxpayer's cooperation, independently determine the amount for want of any reliable
paper trail
An audit is an "independent examination of financial information of any entity, whether profit oriented or not, irrespective of its size or legal form when such an examination is conducted with a view to express an opinion thereon.” Auditing ...
and/or other documentation.
For example, most jurisdictions legally require taxpayers to report
gratuities and pay taxes on the full amount. However, if a taxpayer receives all of his or her gratuities in cash, (s)he may low-ball on his or her tax return by declaring only a portion of the gratuities received. Unless the taxpayer has failed to disclose anything at all (or declared an unrealistically low figure), then without reliable documentation to prove any suspicions tax authorities and the governments they serve face a
dilemma
A dilemma ( grc-gre, δίλημμα "double proposition") is a problem offering two possibilities, neither of which is unambiguously acceptable or preferable. The possibilities are termed the ''horns'' of the dilemma, a clichéd usage, but disti ...
– they can either choose not to pursue their suspicions or they can employ highly subjective and/or arbitrary enforcement methods (such as so-called "lifestyle audits") to provide legal basis to their claims. Either approach carries the risk of damaging public confidence in the integrity and/or fairness of the tax system with a segment of the population.
Tax authorities employ various methods to deter such activities. For example, the
Internal Revenue Service
The Internal Revenue Service (IRS) is the revenue service for the United States federal government, which is responsible for collecting U.S. federal taxes and administering the Internal Revenue Code, the main body of the federal statutory ta ...
in the
United States
The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country primarily located in North America. It consists of 50 states, a federal district, five major unincorporated territorie ...
requires employers in industries where tipping is common to maintain meticulous records of all tips earned and to account for tips when calculating payroll deductions, and also levies heavy penalties against employers and employees alike in cases of noncompliance. Even absent such rigorous and targeted recordkeeping requirements, the increasing prevalence of tipping using electronic payment methods makes it far easier today for tax authorities to obtain credible evidence of low-balling compared to past years.
Taxpayers able to claim deductions may sometimes "high-ball" these figures to low-ball their taxable income. For example, a taxpayer who is allowed to deduct fuel expenses may high-ball this write-off by also claiming fuel purchased for personal use. Especially if the taxpayer has falsified a mileage log and/or purchases personal use fuel from the same vendors (s)he uses for legitimate business fuel purchases (and obtains the same sort of receipts for both) then proving a taxpayer has illegally claimed such personal expenses can often be extremely difficult. In response, tax authorities suspecting such activities sometimes forgo criminal charges in favor of civil proceedings since these have a much lower standard of proof.
To further deter low-balling, lawmakers in some jurisdictions have even enacted measures to apply
reverse onus A reverse onus clause is a provision within a statute that shifts the burden of proof onto the individual specified to disprove an element of the information. Typically, this particular provision concerns a shift in burden onto a defendant in eith ...
in civil tax proceedings, meaning that when the tax authorities choose to pursue civil proceedings it is up to the taxpayer to prove that (s)he did not earn the disputed income and/or incur the disputed expenses legitimately and not the other way around.
Negotiation
In
negotiation
Negotiation is a dialogue between two or more people or parties to reach the desired outcome regarding one or more issues of conflict. It is an interaction between entities who aspire to agree on matters of mutual interest. The agreement c ...
, an ambit claim is an initial demand made over and above what is expected in counter-offers and
settlement
Settlement may refer to:
*Human settlement, a community where people live
*Settlement (structural), the distortion or disruption of parts of a building
* Closing (real estate), the final step in executing a real estate transaction
*Settlement (fin ...
.
Studies
Cialdini, Cacioppo, Bassett, and Miller (1978) demonstrated the technique of low-balling in a university setting. They asked an initial group of first-year psychology students to volunteer to be part of a study on cognition. The researchers were clear about the meeting time being 7 a.m. Only 31 per cent (control group) of the first-year college students were willing to sacrifice and wake up early to support research in psychology. In a second group condition (lowballed group), the subjects were asked the same favour, but this time they were not told a time. Of them, 56 per cent agreed to take part. After agreeing to help in the study, they were told that they would have to meet at 7 a.m. and that they could back out if they so wished. None backed out of their commitment.
On the day of the actual meeting, 95% of the lowballed group who agreed to participate showed up for their 7 a.m. appointment and 79% of the control group who agreed to participate. Hence, when people have already showed commitment it's least likely for them to back off as they have already made up their mind.
See also
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Argument to moderation
Argument to moderation ( la, argumentum ad temperantiam)—also known as false compromise, argument from middle ground, and the golden mean fallacy
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Bait-and-switch
Bait-and-switch is a form of fraud used in retail sales but also employed in other contexts. First, customers are "baited" by merchants' advertising products or services at a low price, but when customers visit the store, they discover that the a ...
*
Boiler room
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Compliance (psychology)
Compliance is a response—specifically, a submission—made in reaction to a request. The request may be explicit (e.g., foot-in-the-door technique) or implicit (e.g., advertising). The target may or may not recognize that they are being urged ...
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Creeping normality
Creeping normality (also called gradualism, or landscape amnesia) is a process by which a major change can be accepted as normal and acceptable if it happens slowly through small, often unnoticeable, increments of change. The change could otherwis ...
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Door-in-the-face technique
The door-in-the-face technique is a compliance method commonly studied in social psychology. The persuader attempts to convince the respondent to comply by making a large request that the respondent will most likely turn down, much like a metaphor ...
*
Foot-in-the-door technique
Foot-in-the-door (FITD) technique is a compliance tactic that aims at getting a person to agree to a large request by having them agree to a modest request first.
This technique works by creating a connection between the person asking for a req ...
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Nirvana fallacy
The nirvana fallacy is the informal fallacy of comparing actual things with unrealistic, idealized alternatives. It can also refer to the tendency to assume there is a perfect solution to a particular problem. A closely related concept is the "per ...
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Overton window
The Overton window is the range of policies politically acceptable to the mainstream population at a given time. It is also known as the window of discourse.
Background
The term is named after American policy analyst Joseph Overton, who stat ...
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Political suicide
Political suicide is a concept by which a politician or political party loses widespread support and confidence from the voting public by proposing actions that are seen as unfavourable or that might threaten the status quo. A politician who is se ...
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Predatory pricing
Predatory pricing is a Pricing strategies, pricing strategy, using the method of undercutting on a larger scale, where a Article 102 of the Treaty on the Functioning of the European Union#Dominance, dominant firm in an industry will deliberately ...
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Selling technique
Sales are activities related to selling or the number of goods sold in a given targeted time period. The delivery of a service for a cost is also considered a sale.
The seller, or the provider of the goods or services, completes a sale in r ...
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Setting up to fail
Setting up to fail is a phrase denoting a no-win situation designed in such a way that the person in the situation cannot succeed at the task which they have been assigned. It is considered a form of workplace bullying.
There are also situation ...
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Slippery slope
A slippery slope argument (SSA), in logic, critical thinking, political rhetoric, and caselaw, is an argument in which a party asserts that a relatively small first step leads to a chain of related events culminating in some significant (usuall ...
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References
“The mindlessness of ostensibly thoughtful action: The role of "placebic" information in interpersonal interaction”(pdf)
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Persuasion techniques