Robot market and the perfect price

I remember from economics class how firms try to navigate pricing. On one side of the spectrum, if you negotiation with each and every customer, you will be able to get the perfect price for each customer. But this takes too long plus it all depends on the skill of the negotiator. So companies decide to set a standard price. This way companies don't have to train every sales rep in negotiation, plus they can conduct business quickly.
Imagine at the grocery store

Clerk: "One can of beans, four dollars."
You:"Four dollars, this is absurd. I will give you a quarter"
Clerk: "A quarter, no sir. That will not even cover the cost of the can those beans are in. A dollar, this is my best price"
You: "Ok a dollar."
Clerk: Scans beans and sends them down to the bags. Picks up other can of beans. "One can of beans, 5 dollars."
You: "Five dollars, you just sold me the identical one for a dollar"
Clerk: "Everyone knows you need two cans of beans to make anything."

This situation is absurd in a western style supermarket. Supermarkets make up for their lack of negotiating a perfect price for each item by volume.

But what if supermarkets could train a robot. A robot that is an expert negotiator and has an unlimited amount of time. Time and negotiation skills are the only two things that are keeping supermarkets from getting the perfect price.

I found the robot. And it is inside the ticket pricing of airline ticket sales.

As I was booking my flight to Portland. I stepped away from the computer to eat dinner. When I came back, the ticket price increased $100 dollars. I couldn't believe it. I saw red glowing letters in the lower corner, 2 seats left. I remembered this feeling from the markets of India. If you come back to a vendor, he knows you are desperate and can jack the price. But,how could the airlines know it was me coming back?
I logged out, then searched without logging in, to see if I could mask my identity. The price had jumped by another 50 dollars. This was getting ridiculous. I was feeling jerked around. I logged in via a virtual connection, so there was no way the airlines could trace my computer. The price was holding steady at 150 dollars above what I initially thought I was going to pay. I pulled up Amtrak and realized that their prices are a joke. I pulled up a driving map to Portland and realized I couldn't make it in time. I decided to sleep on it. The next morning I searched again and the price dropped back down to the original level I was set on.

I don't know what sort of robot I was negotiating with, but I dealt with it the same way I did the in markets of India. I just kept asking for the same price over and over again, refusing the answer I didn't want to hear.

Intercultural Tip: Specific cultural skills are not always culturally bound. Find ways to apply skills learned abroad in the new context back home.

American Negotiation

One thing traveling in a developing country does to you is develop your sense of what is possible. As I mentioned in previous blogs, everything is negotiable. This realization of the possibility sticks with me weeks after I return. Little did the agent at the rental car agency know.
I got this call on the phone asking if I had received the packet of information regarding damage to the rental car I had recently rented in Denver. I mentioned that I did not and it turns out that they had sent it to the wrong address. I rented that car several weeks ago, but I remember my interaction at the return station. The car check in person noticed a small indentation in the hood of my car and mentioned I would be getting a phone call. I didn't respond at the time because I was focused on catching a flight. But, here was the call, several weeks later and I was ready.
Because you Intercultural Adventurers know from the post

Negotiation in a land where "Nothing is available, but everything is possible"

that all things are negotiable, I will structure this post similarly.

Indian Step One: Order Chai.
In India, I ordered chai for various reasons. But this tactic was not available. I wanted the same effect, so I modified. I ordered the agent to send the packet to me overnight.
This does two things
First, it enriches the power dynamic. He may be able to order me to pay for damages, but I can still order that he send the packet to the correct address.
Second, I am acknowledging the culture of an agent in a call center. Having worked in a call center myself as a kid, I remember that following the process was all I was allowed to do. I could do something extra, such as overnight a package, if it was contributing to the process.

Indian Step Two: Interrupted for advice.
Again, I needed to modify this for the more direct culture. I asked the agent if he was from Denver.
My intent with this question was as follows.
First, it subtlety establishes the fact that he was no where near the event and does not know the details of the car, the agency or the employees in question.
Second, it gives the negotiation time to breathe. It lets the agent know that this will not be a pro forma interaction.
Third. When one asks questions, they are establishing a power dynamics. Think of cop movies, "We are the ones asking the questions here."

American Step: Debate.
This is something I learned not to do in most other countries. In the rest of the world, deals happen because of relationships between individuals, not the salience of points won in honest non-personal debate, matter. But with this agent, I was on my home turf.
First attack the subject of the matter: "I disagree with the allegation that there is damage. While I did notice something on the hood of the car after the check in person pointed it out. It was invisible in most light conditions, and I had to bend over to see what the person talking about."

Second attack the process: "Furthermore I disagree that the way in which I was held liable for damage to the vehicle. When I rented out the car, the sales agent held report where I should have been able to indicate previous damage to the car. On top of that the sales agent quickly walked me around the car. Had I been given the report or given the time to fully inspect the vehicle, I may have noticed the small indentation on the hood.

Third, feign insult while demanding credibility. "I didn't jump on the hood or park my car under trees with falling branches. Furthermore, I would not wipe off the evidence such as marks or scratches on the car if that were the case. I would own up to it. I don't even know what caused this indentation"

Indian Step Three: Flatter
While flattery in America will not get you as far as in other countries, face saving is still something to consider. After all, if I were to get this guy angry, he could come after me as a matter of spite. After all, he has nothing vested in the entire case. "I know you are just doing your job and you don't make the rules. But damage was there before I rented the car and the process for determining that I am liable is weak. You can't control these things. " On top of this, I wanted to give him a way to take the high road, or at least tell his boss that he took the high road. "This is my first rental car experience with your company. I have many years left in my rental car life. I am going to rent a car in the future, so I don't know that, from a business perspective this is really worth it. Anyway send the paperwork my way and we will see what happens."

I got a call 20 minutes later
"We determined the damage to the vehicle to be pre-existing."

Intercultural Tip: Your experience in other cultures are not locked there. Integrate what works.

Markets and Taxi Cartels

During my first few days in Addis Ababa I was spending nearly 10 dollars a day on transportation. The price was ridiculous. That is the price of a whole day’s worth of delicious meals and macchiato breaks between each meal. I knew there was a market disparity because of my white skin, but could it have been so high? 10 dollars is what most Ethiopians make in a week, so there must be another way. I tried bargaining at taxi stands. However this quickly turned futile as the men quickly locked in on a price. Before I go on further about pricing, let me refresh you on a brief economics lesson on markets and prices.
In a free market, services are priced at a certain point. (Let’s say 10 for one taxi ride) At this price point providers of services enter the market ("I can make a weeks wages if I find just one foreigner, I'm in!!"). A flood of service people enter the market ("Looks like these guys all had the same idea, so much for the easy $10.") At this point there is more supply of service than demand and service providers must compete. Service providers can either compete on price or service ("These fools have dirty cars, I will have the cleanest and rake in all the customers." or "So much for my $10 lottery ticket, I will increase my chances if I lower my price to $9"). Those who can't provide a better service or lower price, can't compete, do not get the customers and leave the market (I'm going back to making a sure $10 a week verses waiting for the $10 lottery ticket that prefers cleaner cars and $9 rides"). Eventually the market achieves a state of equilibrium where there are just the right amount of services for the amount people are willing to make.
The scenario presupposes two things free markets and competitive forces. Two things that exist in abundance in the Western World I inhabit, but do not exactly work as such in other areas of the world. I should have remembered that men at taxi stands quickly apply cartel pricing when I start to apply competitive forces to achieve a price that is more fair. Cartel pricing is also called fixed pricing. If everybody locks in their heels on a price, then everyone will get richer. This is such an effective strategy for business, that governments around the world have strict laws forbidding cartel pricing.
Cartel pricing and competitive forces sounds rather academic. Here is how I imagine these two concepts sound.
"Listen Tagle, you can't park your taxi here at this taxi park because you cheated all of us by offering to drive the foreigner for $9. Get out of here, and you can't come to my birthday party either"
"I needed the $9 you guys. Since your nephew brought his taxi to our stand were are not seven at this stand it is getting crowded. 9$ was a lot better than my one in seven chance of getting $10."
"You sound like an economist, get out of here and teach a class."

The long and the short of it was that I was not going to pay wildly inflated prices. It wasn't so much a money thing as a being cheated because I am a foreigner thing. Some foreigners have experienced affluence guilt and pay inflated prices to assuage their feeling of good fortune. However, I know that I have a set amount to spend in a county. That money can either be spent on people providing services and products that are worthwhile or the money can be spent on cheats and over chargers. The charitable advantage to spending money on things that are worthwhile is that you encourage people doing work for money verses people waiting half the day at a taxi stand for the lotto ticket foreigner.