This question is too broad. It differs in every country and even within each country. Both the question and some of the answers here seem to presume that techniques that work in one place will also work in another.

In Beijing you can bargain very extremely hard without ever causing real offense (or at least I’ve never noticed it). But cross over to the markets in Chiang Mai or Bangkok in Thailand and they will get offended (or at least I’ve regularly caused such offense). Explaining why exactly this is the case would required detailed understanding of the cultures in each country.

(BTW, wherever I am, I always test the extreme limits of how cheap things can go because I am an unusually cheap bastard. So believe me when I say that in Beijing they are never offended. Indeed the vendors there positively take great pride and delight whenever they manage to rip you off.)

In some countries (China, India) they are completely dishonest and try to rip you off as much as possible, and you need to bargain very hard. You might need to start with offered price / 100. Other places they only ever inflate the price slightly, so you can only ever hope to reduce the price by at most 30%.

It also depends on who you are and what you look like.

For example: If you are in Beijing, you’ll get ripped off less if you are a local city resident, than if you are from Wuhan, than if you are an overseas Chinese, than if you are a Mandarin-speaking foreigner, than if you are an American Chinese (who doesn’t speak Mandarin), than if you are an American Caucasian.

If you want to, you can also bargain pretty much everywhere in the world, even in affluent countries where this is not customary. Ask and you might be given a 10% discount.

I do not think there can be general worldwide recommendations except to experiment and practice, when you get to each place.

Negotiate to Reach an Agreement

The first thing to understand is that the purpose of negotiating is to reach an agreement. It’s not about beating someone, but rather you should aim for a mutual victory. Someone is selling something you want/need for a given price, and you wish to pay a different price. If at the end of the negotiation you walk away without that service/good/keychain/whatever, and the seller does not make a sale, you both lost. If, on the other hand you walk away with what you needed managing to save a couple bucks, you both won.

The corollary here is that negotiation implies willingness to modify one’s position. Stubbornness is the enemy of negotiation. This works both ways: if the seller tells you that prices are not negotiable then he will never make the sale. Similarly, if you offer one price and stick to it no matter what you will never purchase the goods.

As this guy puts it:

Don’t try to be the victor. Avoid zero-sum games where someone else has to lose in order for you to win. If you negotiate like that, you’ll probably win a few, but you’ll lose just as many and kill a lot of good relationships along the way. Instead, find a way for everyone to win.

Furthermore, because negotiating is not a conflict, you should always be happy when doing it. Always keep a smile on your face and be courteous. You will immediately witness how this approach changes the dynamics of the discussion.

The Price Is Right, For You

The second thing to understand is that you will always end up paying more than some people, and less than others. This means that foreigners will invariably pay more than locals. And this is somewhat fair since very often foreigners and tourists can afford more than locals. The point being is that you should not care about how much others pay. Moreover, always assume that you will find that same thing you just bought for slightly cheaper, one block away from where you purchased it. Once again: you should not care.

You should instead pay the price you think is right at that particular moment. “Right” here means a variety of things, and is often subjective (hence why people pay different prices). You know you did not pay the right price for you, if you walk away from the sale feeling either angry because you think you were ripped off, or guilty because you think ripped the poor guy off. These feelings will spoil your mood, and you will not enjoy the rest of the day. Imagine negotiating for a Coracle boat ride in Hampi, India, and feeling foul throughout the whole one-hour ride down the river. You think you would enjoy it?

Moreover, the price depends on offer and demand. If you are stranded in the desert and you meet the only person with spare supply of water, then you will pretty much end up paying an exorbitant price for that water. However, that price will be the right price, simply because that purchase will save your life.

Finally, it helps to know how much the local currency is worth in your currency. It is also important to know what is the cost of living in the country you visit. How much does bread cost? This is a great metric to gauge how much you are effectively spending in local currency terms.

Negotiating Techniques

Having understood the afore-mentioned points, you now have the right state of mind to begin negotiating. There are of course a set of techniques you can use. Negotiating is a game. Not only you should enjoy it. You should also make sure you are the seller are both playing with the same rules.

1. Never Quote the First Price

This basically means: never speak first. Let the seller do the talking at the beginning. This will give you a feel of what price range you will be dealing with. Moreover, it will ensure that you don’t immediately overpay for something. Remember that you cannot go back on a quoted price. You can however walk away.

2. Everything Is Negotiable

This is a corollary of my first “Negotiating means Reaching an Agreement” point. A seller that is not prepared to give in, may it be lowering the price, offering something extra, etc. is too stubborn for you to waste your time doing business with.

3. Every Word Spoken when Negotiating Is a Lie

Assume that everything you hear or say during a negotiation is a lie. Ranging from “there’s a guy down the street selling this for way cheaper”, to “these are genuine local products you won’t find anywhere else”, it’s all gibberish talk. So embrace this philosophy and don’t be afraid to overshoot your statements. Keep a smile on your face and always be respectful, of course. However keep in mind that no souvenir vendor will never be really offended if you criticise the items on sale, seeing as they have no personal value for him.

4. Act Like an Expert

Whenever you look at something you think of buying, examine it as if you had a PhD on the topic. Look for defects, scratches, dents, threads sticking out, bits of glue missing, etc. Then, point the defects out. Don’t be afraid to ask to see a different item of the same kind. You want the seller thinking that you are an informed buyer who will not be fooled into purchasing something that is low quality.

5. Use the Local Culture to your Advantage

Learn a few words in the local language. Greetings are particularly important. If you walk up to a seller and say “hello” in their language they will stop regarding as a human-piggy-bank-tourist. Nothing beats greeting people in the Souqs in Marrakesh with an “As-salamu alaykum”.

Learn the local customs. For example, in Muslim countries, Barakah (destiny) is a fundamental concept. Making the first sale of the day is very important because superstition says that a good start to a day means the whole day will go well. Always ask if you are the first customer of the day. You will often be able to obtain a bargain with a lot less effort.

6. Older Means Wiser

Look out for older sellers. If you enter a family-run business, speak to the grandfather, the father or whoever is the oldest in there. Older people are often less willing to rip you off. Because they are old, they have seen it all, done it all, and are not as hungry to make extra bucks by negotiating hard with you. The youngsters, on the other hand will be very hungry.

7. You Can Walk Away

Remember you have the choice to walk away from a purchase. Never forget that the buyer is the one spilling out the cash, and this is a tough decision. Way tougher than a seller lowering the price. The fact that you engaged in a half-an-hour discussion with a seller does not in any way bind you to purchase anything. If you feel that the price is not right, the item is not the one you want, or if you have other unsolvable doubts, say no thanks, goodbye and leave.

Start with price / 100, and move up to price / 4.

The best option according my experience. You get the discount and you are honored by locals. Try to do it artistically, and good luck.

The single most difficult task in haggling is known the right price of the object you are trying to buy. It’s not even the time spent haggling because you could have been quoted such an outrageously high price that even when you drive it down, the price is too high. What I do is strike up a rapport with hostel staff and ask them for ballpark figures for souvenir items. Usually, they won’t mislead you.

The other things I have found from experience is that Westerners are uncomfortable making aggressive reductions in price. The price you first quote during haggling should be much below what you really want to pay because the social interaction of haggling makes it implicit that the shopkeeper will use that as a baseline to drive up the price. Many inexperienced hagglers will name what they think is a fair price as the starting point, from where on you only lose because the price will go up from that point.

Also you should know where not to haggle. That would be a faux pas. For instance, never haggle at branded stores or bookstores, those items usually have fixed prices. Stores with printed price tags are usually ones where haggling is not allowed but not necessarily so as sometimes some stores try to trick you into not haggling with a higher price tag with the expectation that you won’t haggle. Again, knowing the local price helps in this situation. Bear in mind that legitimate branded stores, souvenir shops or bookstores will give you the correct local price, not an inflated figure.

You need to have a real understanding of what the local currency is worth in your home currency. It’s very easy to get blinded by large numbers.

I was in Indonesia, haggling over a set of wicker place mats. The exchange was about 9000 Rupiah to the USD. Starting price was 250,000 Rupiah for a set, about $27.00. We ended up paying 100,000, The price drops fast at first, and then we spent a lot of time in 10,000 R increments.

The funny thing is, that I wasted about 15 minutes per US dollar of savings. I could have quickly closed the deal at 160,000 or so, and moved on. We were blinded by the large numbers involved in the local currency. We saved 10000 of something, that’s got to be a lot right?

Tips: If you are in a patriarchal society, and traveling as a couple, the act to put on is the eager, but financially naive wife, and the frugal husband. Let the wife do the bargaining. When bargaining gets a bit tough, then the angry husband should chastise the wife for wasting all of his money. This lets the shopkeeper know that there is a sale to be made, but the price will have to go down. There is a strong man around who is willing to put his foot down, and keep his wife from frittering away the family wealth.

This works well in southeast Asia, but not necessarily the Philippines. Filipino wives tend to rule the roost and the purse strings.

The easiest way to haggle, especially if you’re inexperienced and feel awkward doing it, is to get a “bulk discount”. So if you’re interested in buying multiple items, always talk about only one item at first and then suggest you might buy e.g. two for 150% of the price of one. Of course this won’t help much with real ripoff prices, but it’s a way to get started.

I got pretty good at this when I was in Thailand, you just have to remember the basic rules

• If you say “Ok” you can’t take your word back.
• The seller will never sell at a loss so don’t have fear.

The greatest lesson learned while haggling is NEVER think that the starting price is somehow related to the value of the object. At first i thought “Well, they are asking me 2,000 Baht, so they will sell it at around 700-800”. No it doesn’t work this way. They try to rip you off in this way.
Once I started bargaining from 60,000 and after three hours I was down to 2,000 (it was a pair of fake Nike shoes). I saw a lot of people buy them for 20,000 and think they got a bargain. In the end I was told that 2,000 was the minimum and that minimum was held for one hour and I really don’t think I could’ve got anything lower.
To arrive at that point I spent a lot of time going away for a little and then coming back with an offer that was at least a little bit higher so that the conversation could keep going and when I got stuck I simply walked away. Since he started from 60,000 I started from 60.
But I was 17 and so I had a lot of spare time, if you just have 15 minutes it’s much more difficult.

I have haggled over the scarfs on the Jemaa el-Fnaa square in Marrakesh. The starting price was usually around 200DH and I was able to buy for 65DH. I was totally unexperienced back then but I made some observations:

• Wait to be invited by the shopkeeper. Pretend you are just passing by and stopping for a moment to look at the wares.
• Do not express interest too soon. If they make the effort to convince you, you will have a stronger position later.
• Hesitate to name your price. Try to to bargain their price as low as possible first.
• Bargaining is a social activity. Just stay there, stare at goods, talk. You do not need to be discussing the price whole the time. It is about carrying on the conversation and giving a room for the price to settle down.
• Adopt the lingo. Phrases like “it is not a real price, give me a real price” are funny to use and show that you have been around for some time.
• Offer to buy more goods for a lower price with caution. Their mathematics is not quite the same as ours.
• Usually they just pretend to be offended. Simply carry on or walk away if you feel uncomfortable. Even if you happen to name a price that is too low, do not be discouraged by their behavior.
• Walking away can bring the price down significantly. Try this if you reached a dead end. Usually they will be shouting lower prices with your every step. Even if this does not happen they will not be offended if you come back.
• Knowing real prices can help. You can ask the staff at international hostels, hotels, etc. But even without knowing it you can quickly develop a good feeling for it.
• Haggling is tiring. It usually takes up to half an hour. Even if you are not quite satisfied with the price, think whether you want to start this process over.

You need two things:

• a good feeling for the local prices and
• experience.

Haggling is more than just quoting low prices. It about your complete presentation and attitude.
When they quote me their first price (I will never be the one to call the first price), I usually just smile at them, maybe tell them it is a ridiculous amount etc. So, while not quoting an amount, I am actually haggling, just not with words yet.

It’s very hard to estimate the actual bottom price, however, (generally) they will not sell below their minimum profit margin. If you hit the real bottom price, you will know. After this happened to you once or twice, you will start to get a feeling for it. (and learn that many times before, they just made you feel like it was the bottom price, but it was actually not.)

If the starting quote is such a ridiculous amount that, if you bring the price down to half, you still pay too much: walk away. Not for show, but for real. As you say, you are worried about offending them, keep in mind they can offend you as well.
This may result in an instant drop in the price. However, if I walk away in a situation like this, they will need to be quite convincing to bring me back to the negotiations.

Don’t forget, haggling can be fun! It’s a very social activity; if you take your time for negotiations, it can be quite rewarding.

The only real way to be successful at this is to start knowing the value you place on the item and never pay more than this. Start your haggling below this price – a good rule of thumb is for your starting price to be around the same amount below your final as the asking price is above.

Some countries like to bargain harder, but at the end of the day, you can always walk away. If they want to make the sale at the price you ask, they will, but as long as you limit yourself to that value you set at the start then you won’t be ripped off.

(it’s a bit how I approach eBay – set my max at the start then have a look after the bidding is complete. The bit in the middle is just to try and persuade you to pay more than you planned.)