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Bargaining

As an engineer, a market perfectionist, an inspired to-be-economist, I hate bargaining. Bargaining is a very inefficient way of trade. The sellers use their advantage of having asymmetric information of the transaction price, getting buyers to pay more they should have. In a perfect transparent market, where everyone knows want everyone else pays, there should not be any room for bargaining. Every buyers should get the same good deal at the market equilibrium. Bargaining not only is a waste of time, it also distorting the market price burden the buyers with additional transaction cost. In short, bargaining is evil. In Indian, you simply can’t buy anything without bargaining, that’s another proof Indian culture is backward.

However, for the first time, I find the joy of bargaining. Bargaining is still evil, but at least if you get are lemons, you can still make some lemonade. Here is the story. Today, I went to MG road, the tourist district in Bangalore, with my colleagues to shop for gifts to bring home. On the street, there is a young boy selling wooden chess set. The chess set is not very pretty, the craftsmanship is kinda rough. One of my colleagues is interested to get one for his son, so he asked for the price. The young boy open his offer with 1500 Rupee. We thought we were quite savvy in bargaining, we slash the prince to 1/3 and make him a 500 Rupee counter offer. The bargaining going back and forth for a while, at last the colleague bought the chess set for 600 Rupee. 60% off from the initial price, we thought that was not bad. The boy try to sell another chess set to another colleague, but we just walked pass an interesting shop, so we enter the shop and ignored him.

We spend quite some time in the shop looking at things. To our surprise, when we come out, the boy is still there waiting for us. Trying to sell us another chess set. We keeps saying we don’t want to buy another set. Then the boy slash the price to 500 Rupee, our original offer. Mmm… if things start getting interesting. If he lower the price, it means there is room for more cuts. I decide to test the limit and see how low can I get. Here the games of bargaining begins. I don’t really want the chess set, so I counter offer him 100 Rupee to see what happen. To keep the story short, the boy followed us for the next hour, when we enter a shop, he just waited outside patiently and continue the bargain on our way from one shop to another. At the end, after I had enough fun and it’s almost time for dinner, I settle make a deal with him at 200 Rupee. The money is not really for buying the chess set, rather it is to reward him keeping us entertained for over a hour. It is only 1/3 the price of what my colleague paid! We laughed at the poor colleague for being ripped off the whole night. We joked that we should have a bargaining competition for those come to Bangalore. Everyone has to buy a chess set from MG road and see who is the king of bargaining.

Here is the moral of the story. 1) Counter offering 1/5 is still too high, you should start from 1/10 as the new default value. 2) If the seller agrees to your price, it means your price is too high. You know you can go lower. 3) Time is money, the longer you bargain, the lower the price. If I have enough time, I think I could bargain it down to 100 Rupee. I suspect the boy can sell it for 50 Rupee and still make a profit. 4) Don’t counter offer at once, let him cut the prince first. 5) Bargaining is fun because you can make your over-paid friend looks like a fool! Probably I still have over paid for buying the chess at 200 Rupee, but the bragging right to make fun of your friend is priceless.

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