A Good Price to Pay

Will Wilkinson recently returned from Turkey and he didn’t enjoy haggling. Will smartly writes:

I understand the price discrimination argument for haggling, especially in a country with a lot of poverty and tourism. But probably hundreds of my dollars stayed in my pocket because I didn’t have good information about the quality of products and I knew the retailer is better at bargaining over the surplus than I am, so… there was no transaction and no surplus. Sure, there is a lot of successful gouging going on, but add up millions of instances of “I know you’re going to screw me,” and I suspect that the average retailer is doing worse rather than better under the haggling system. And how about the average native consumer? In competitive posted-price markets, the system basically pre-haggles the price down to the point where the consumer gets most of the surplus. This is why Wal-Mart is a humanitarian triumph, and a shining symbol of civilization.

Well, I don’t quite agree with that last bit. I had the chance to go to Egypt last year and I really did enjoy haggling. In the Khan al-Khalili bazaar men would tug on my coat and give me a very practiced desperate look that seemed to say, “Just give me your money. I need it. I could take it if I felt like it.” It was exhausting. But it had its charms if you were willing to master it. Ask to sit down and discuss the price over some tea – that usually helps. As an American you aren’t getting the objects as cheaply as some natives, sure. But you really aren’t getting “screwed” either; this is the third world. Stay interested in the object and noncommittal about the price and it falls, and falls, and falls. Try that at Neiman Marcus.

Also, I think my friend Will is not counting the non-economic aspects of a haggling transaction. First there is the very real benefit of making economic transactions more social. Will may feel he’s getting squeezed, but local customers may be getting service and value. Sure, you agree to pay too much one time, then get a nice discount when everyone knows your money is tight. Sellers will get good and bad reputations locally. There are also the psychic pleasures of screwing over Americans – certainly worth losing a few bucks from the very few tourists like Will who are turning over the macro and micro economic consequences of haggling in their heads instead of getting into the spirit of things.

Will may identify Wal-Mart’s scanners, listless employees, and algorithmic pricing structures with civilization. My guess is that it is just one white man’s prejudice for a depersonalized economy. There are probably many Arabs, Turks, and others from haggling cultures that, if they thought about it, would consider computerized pricing a kind of atavism.