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.
This makes no sense to me, I’m afraid. I’m pretty sure Will has taken these objection into account.
— Reihan · May 13, 08:40 PM · #
I get Michael’s drift, but dammit, I just hate to haggle. Shopping in Beijing, I had to choose between pressing for a deal and having the vendor act like I was taking food from his children, or agreeing to an exorbitant price and having my Chinese buddy act like I’d just cooked my own kids and fed them to the dealer.
As far as the microeconomic of posted prices, though, I wonder if thorough posting introduces price stickiness that negotiated prices avoid? Not every store can revise its prices like a gas station to reflect costs.
— Matt Frost · May 13, 10:47 PM · #
“haggling cultures” brilliant
— blakey · May 13, 11:18 PM · #
It’s pretty simple: people in haggling cultures (and Michael, and me) prioritize the advantages of haggling over the disadvantages, which Will prioritizes. Unfortunately, Will is a blogger, and must act (as he is professionally obliged to) as though his personal taste is more than that.
— Freddie · May 14, 12:14 AM · #
I suspect that Will, like most of us, knows pretty much nothing about the native experience in haggling cultures. I don’t claim to have any great insight here either, but I do know that the experience of an American tourist isn’t even remotely comparable to the experience of a local in these situations. This is a case where “I suspect” doesn’t get you very far.
— A · May 14, 02:33 AM · #
Freddie:
Who are your “people” here? Do you really think there’s a pro-haggling consensus? Not to get all Marxist or anything, but I suspect that even in exotic, swarthy parts of the world where it’s fun to shop, some people with certain economic interests establish and maintain social and commercial patterns that privilege those interests at others’ expense.
— Matt Frost · May 14, 03:01 AM · #
Price gouging isn’t just about enjoying haggling. It takes into account that 1 Lira is worth less to a foreign tourist who earns in Dollars or Sterling then it is to a local who earns in Lira.
Having grown up in Pakistan, one of the more amusing sights was relatives from abroad gleefully converting whatever they bought into Dollars. Of course if my aunt went out shopping with my mother, she would let my mother speak so as to not reveal her accent and be able to get a better price.
This isn’t to say that haggling doesn’t occur b/w the native consumer and native purchaser – of course it does. I don’t enjoy it that much but that’s just my preference. However as Michael notes, its part of the game in that particular culture.
If the majority of people didn’t enjoy haggling, then you would see more shops which sold on a fixed price basis. These guys are still rational in the market sense of the word and very, very shrewd.
— Shariq · May 14, 10:14 AM · #
I really like most of your pro-haggling arguments…they appeal to several of my economic and cultural prejudices, and don’t actively offend the others. Having said that, I hate haggling. I’m no good at it, and find the whole thing slightly embarrassing. I worked very briefly as a furniture salesman, and found the experience even more taxing from the other side. I think “haggling cultures” is right…while some outlying individuals in various “non-haggling cultures” might excel at it (my Swedish-American boss at the furniture store, for instance), I think if you’re aren’t brought up to get a taste and a feel for it, you’re just not going to be very comfortable. I suppose, like Will, I’m just too anglo for it, though unlike him, I’m not about to intellectualize this banal observation, or jump to endorsing the opposite extreme of Wally World, either.
— ERM · May 14, 04:22 PM · #
I really hate haggling in, say, Mexico (where most of my non-fixed-price shopping has occurred) but don’t mind it at the local Best Buy, when I’m making an electronics purchase and negotiating for free delivery, or a reduced price on the warranty, or whatever. I suppose I feel less guilty about haggling with Best Buy, since there’s not such a disparity in bargaining power.
— LP · May 14, 05:15 PM · #
Fixed-price no-haggling shopping emerged in the West in the 19th Century, especially with the beginning of huge department stores, such as the Bon Marche in Paris.
Fixed prices “scale” better. Haggling works fine for the shopowner where all the employees are his relatives whom he trusts to drive hard bargains for him. But once you start hiring strangers, the shopowner worries that they will incompetently give away the product too cheap or collude with customers to sell at too low a price. So, big stores switched over to fixed prices for the same reason they installed cash registers — they didn’t trust non-family employees, so they made the salesclerk job more routinized and documentable.
In haggling countries, most retailers are owned and operated by families. Outsiders have little hope of advancement in the firm.
— Steve Sailer · May 15, 07:39 AM · #
“Fixed prices “scale” better. Haggling works fine for the shopowner where all the employees are his relatives whom he trusts to drive hard bargains for him. But once you start hiring strangers, the shopowner worries that they will incompetently give away the product too cheap or collude with customers to sell at too low a price. So, big stores switched over to fixed prices for the same reason they installed cash registers — they didn’t trust non-family employees, so they made the salesclerk job more routinized and documentable.
In haggling countries, most retailers are owned and operated by families. Outsiders have little hope of advancement in the firm.”
But car-dealerships?
The more I think about Will’s argument, the more I wonder…even here in the West, “haggling” is ubiquitous in all purchases from automobiles on up in price, and in all non-retail transactions such as business deals. But we dignify this with the fine Latin word “negotiation” to separate it from something THOSE PEOPLE do. Does Boeing send some son-in-law of the nephew of William Boeing’s grandson over to American Airlines when they want some jumbo jets to make sure they don’t get screwed on the unit price?
— ERM · May 15, 04:03 PM · #
I just don’t get the people who like to see a holy glow over the Wal-Mart. Maybe I’m not able enough to emotionalize my abstract understandings…but to me the inescapable truth is this: except for how cheap things are, everything about shopping at Wal*Mart sucks. The crowds of cars in the lot, the vast stretches of hot stinky asphalt, the crowds of people in the store, the utter absence of presentation or arrangement of the wares, the listless employees, all of it. It is a dehumanizing experience, every time. None of this is original, I know, but Will’s blithe approval of the Wal*Mart model just raises my hackles.
— dgj · May 16, 02:50 PM · #