You’re at the market. You want to buy a kilo of oranges but there are no prices listed. How can you avoid paying too much? The short answer is you can’t. This is an example of what economists call “information asymmetry” where one party is aware of important information that is unknown to the other party. The fruit seller knows the wholesale price of oranges, the typical price of oranges, and the lowest price she would be willing to accept. More importantly, she’s aware you don’t know any of this.
Locals don’t have this problem because they’ve grown up here and know how much things cost. They know that the best possible price one could get for a kilo of oranges is X and the most any sane person would pay is Y. Therefore almost all oranges will be sold at a price between X and Y, with the seller trying to get the price as close to Y as possible, and the buyer trying to get it as close to X. You of course are ignorant of this and might get quoted a price of 2Y. After much negotiation you settle on a price of 1.5Y. You feel proud of yourself for negotiating a good deal when in reality you’ve been totally screwed.
One way to deal with this is to ask a local how much a kilo of oranges usually costs and pay something close to this (as a foreigner you will never get a great deal, but it’s possible to get an OK deal.) You could also ask for prices from a variety of fruit sellers and use the lowest quoted price as a starting point for negotiations. Lastly, there’s the copout strategy where you just get your Lao friend/boyfriend/girlfriend/spouse to buy the oranges.
Now obviously spending $.25 too much on some fruit is insignificant to even the cheapest backpacker, but the oranges are just an example. Many, many prices are negotiated in Laos and small rip-offs turn into big ones and quickly add up. If you live here and have to rent a house and buy a car, motorbike, TV, computer, DVD player, etc., you’re potentially wasting thousands of dollars that could be better spent on Beerlao.
How to get good prices on items is something I’m frequently asked. I guess people think there’s some kind of magic formula like “the quoted price is 2 ½ times the real price” (I might start saying that just for fun), but the reality is far more complicated.
This has nothing to do with anything, but someone needs to come out with a smart phone that’s also a universal remote. Think of the convenience.
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3 comments:
What is your idea of how much one should spend to rent a motorbike for a day (12.00-20.00)?
60-100k for a basic motorbike. It will be more for a big dirt bike or proper motorcycle. You'll probably have to leave your passport with them.
Thanks. Live in Bkk, but like to travel to Laos now and then, and do not have much knowledge about prices. Paid 80K for an automatic, so will be back at that place.
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