Great idea, dissapointing proof of concept. There are many things to do to work out a bargaining algorithm.

What is the price of a similar item in other online stores? What does the potential customer finds appealing in the deal? Is it the first time the user tries to bargain for the same or similar item? Are there other items of interest (that the user browsed) we could throw in the bargain to make the user buy at the listed price? Or redirecting the user to a feature enhanced item for the same price.

Offering a lower price as soon as the user starts bargaining might also make him think that listed prices are not real prices.