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It sounds like they want you and want to see how low you would go. The lower you go the less they have to pay you. Not a good way to start the relationship.
Unless you are in a "need the job" instead of "want" situation, I would say
"Since you know what you are able to pay, it's more your decision than mine. I am seriously interested in the position and hopefully your offer will be one I can commit to."
Put the pressure on them to come up and not you to go down.
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Joe
See Porsche run. Run, Porsche, Run: `87 911 Carrera
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