Against haggling: woolly thoughts on the pre-industrial mode of production

A description of trade among Australian hunter-gatherers from David Graeber:

In the 1940s, an anthropologist, Ronald Berndt, described one dzamalag ritual, where one group in possession of imported cloth swapped their wares with another, noted for the manufacture of serrated spears. Here too it begins as strangers, after initial negotiations, are invited to the hosts’ camp, and the men begin singing and dancing, in this case accompanied by a didjeridu. Women from the hosts’ side then come, pick out one of the men, give him a piece of cloth, and then start punching him and pulling off his clothes, finally dragging him off to the surrounding bush to have sex, while he feigns reluctance, whereon the man gives her a small gift of beads or tobacco. Gradually, all the women select partners, their husbands urging them on, whereupon the women from the other side start the process in reverse, re-obtaining many of the beads and tobacco obtained by their own husbands. The entire ceremony culminates as the visitors’ men-folk perform a coordinated dance, pretending to threaten their hosts with the spears, but finally, instead, handing the spears over to the hosts’ womenfolk, declaring: “We do not need to spear you, since we already have!”

This prompted a comment from Daniel Davies that it seems a lot of work to organize an orgy every time I want to buy a blanket.

souk-fes-moroccoI thought of this in Morocco recently while Lu was haggling for rugs in (orgy-free) Moroccan souks.

Some people quite enjoy haggling, some like me do not, but it’s always tiring and time-consuming. A Moroccan craftsman must spend an hour a day haggling with customers over his wares, and with his suppliers over their inputs.

Economists have long been fascinated by the process of market negotiation. They even see it as a paradigm for human interaction. Adam Smith defended self-interested arm’s length trade as a more solid economic base for society than unreliable benevolence. Léon Walras upped the stakes with his powerful idea of a general equilibrium: but to construct it, he needed to spin a fairy tale of an autarkic village market, to which peasants bring their produce and discuss prices until everybody is in subjective equilibrium, when the bell strikes and all the contracts are consummated. It’s too bad that no such market has ever been seen. And that counts as realistic by the standards of later general equilibrium models, with perfect information and zero transactions costs across whole industrial economies.

Actual industrial economies have in fact largely abandoned these face-to-face, open-outcry, haggling markets. This was an inevitable result of indutrialisation. According to Wikipedia (sourced to Emma Griffin):

A worker spinning cotton at a hand-powered spinning wheel in the eighteenth century would take more than 50,000 hours to spin 100 lb of cotton; by the 1790s, the same quantity could be spun in 300 hours by mule, and with a self-acting mule it could be spun by one worker in just 135 hours.

(The fine fibres of cotton must be very difficult to spin by hand; handspun wool output must have been much higher). A week’s output – say 60 hours – of one independent worker in 1750 would then have been two ounces of cotton thread: a small bag or spool he or she could haggle over with a weaver or seamstress. In 1800, the owner of a small state-of-the-art spinning mill with 100 workers would be producing two tons of cotton thread a week. He could not possibly sell this in the same individualised way. The practicable pricing systems became: long-term supply contracts; a fixed sales tariff, updated from time to time; an organised central exchange aggregating many buyers and sellers and trading standard spot and futures contracts; and a centralised auction, as with Dutch flowers.

The centralised systems have large setup costs and are only feasible for highly standardised products. You could not for instance sensibly have one for the huge variety of printed textiles. By the time products reach consumers, fixed-offer pricing is the only game in town, with a very few exceptions: real estate, second-hand cars, luxury hotel rooms (but not restaurants). Even most financial markets work on fixed offers, adjusted rapidly. The competitive markets that keep policymakers and buyers awake at night are not those for tires and bolts and shares and breakfast cereals, but precisely the negotiated ones for real estate, second-hand cars, and complex financial products.

We are so used to fixed-offer pricing as the norm that we forget it is quite recent in human history, and don’t notice that it takes us ever further away from Walras’ village general equilibrium and the real-life haggling-based Moroccan souk. When the fixed offers are set wrong, stocks run out or stay on the shelves unsold. Tut tut. Paretian inefficiency!

But so what? Time is money, as they keep reminding us. Negotiating costs are real and large. As we all get richer, it becomes less worthwhile to spend time searching out the lowest price. You and I will shop around for a €300 smartphone, but not for a €3 T-shirt as long as it fits. The Moroccan souk merchant is well aware of this propensity and uses it to extract as much of your consumer surplus as he can. The souk does not yield Walras’ single market-clearing prices, rather a cloud of individual transactions between the buyers’ and the sellers’ reserve prices, scattered round the notional equilibrium by the haggling contests.

Real economies operate of necessity in disequilibrium, as I’ve proposed here before.  Actually feasible price-setting systems cannot achieve general equilibrium, and will vary from it in different ways. So even if you take Paretian efficiency as your sole criterion, it’s not self-evident that modern bureaucratic, fixed-offer capitalism is further away from it than the pre-industrial haggling souk. Supermarkets leave around 10% for fruit and vegetables unsold (here, page 10). The profitable French tiremaker Michelin typically ends up with a more surprising 20% of dead stock (here, page 2). I suppose this includes advances to retailers for the replacement market, where they make all their money. Does anybody have comparable numbers for pre-industrial markets? I’d be very surprised if they were lower.

I’m well aware, thank you, that Soviet central planning was much, much more wasteful. But we should be sceptical of the the (Hayek?) story that this had anything to do with a failure to solve the coordination problem and compute a feasible general equilibrium. On paper the material balances arrived at by Gosplan, through trial and error more than computation, were more or less OK. What doomed the centrally planned economy was the failure to create (outside the defence sector) incentives for quality and innovation like product liability and sale-or-return, the absence of a hard budget constraint on firms enforcing Say’s Law and efficiency, and systematic excess demand, the whole ensuring long queues for dud televisions. GE and GM are large command economies too, and they are not run by computed optimisation either. What keeps them working is that the relations between their component factories fully satisfy my conditions. The car assembly plant will return dud gearboxes to the gearbox factory, which will deduct the returns from its sales, and its imputed profits and the manager’s bonus go down. When GM’s overall outgoings exceeded its sales to customers, it was forced into bankruptcy.

In any case, productivity trumps efficiency any day. I’m not defending waste, but prizing market-clearing over plenty is perverse. The real problem for the tourist in the souk is the strain of dealing face-to-face with people for whom 50 dirhams is a lot of money, since their productivity is very low, and closing the deal with you is important. You can’t miss the anxiety and tension. Worrying about prices is a psychic cost.

Marx’s theory of alienation certainly captures important defects of the condition of the worker in industrial capitalism who completely loses control over his or her working day. It is also based on an absurd idealisation of the pre-industrial condition. What was the difference in autonomy between the Lancashire mill worker of 1840 and the household servant in Blenheim Palace in 1740? In the ancient world, domestics were slaves – that’s the etymology of “servant”. Pre-industrial peasants could in theory set their own work agenda, but this freedom was tightly constrained by custom, the environment, and fixed technology. The pre-industrial artisan had more options. But can we really believe Marx’s dithyramb to an independent producer’s relations to a customer:

I would have the direct enjoyment both of being conscious of having satisfied a human need by my work, that is, of having objectified man’s essential nature, and of having thus created an object corresponding to the need of another man’s essential nature. . . . Our products would be so many mirrors in which we saw reflected our essential nature.

That’s not how I saw Lu’s transactions in the souk. On the contrary, each participant was forced into a sports-like contest of will and wit, without the winner’s reward in a real sporting competition of third-party esteem. In haggling, the human relationship is narrowed into a focus on money as alienating as wage slavery.

SupermarktWhen I deal with the lady wage slaves at the Spanish supermarket ham or fish counter, neither they not I can affect the prices set by the store management. Our conversation is as free and easy as we want it to be. They are under a little management pressure to be civil, but there’s no supervisor in sight and little monetary incentive to do more than the minimum. I find this a far more human and less alienated relationship than haggling.

I wonder if this helps explain the prejudice of Ancient Greek ̩lites against trade, channelled here by Aristotle in the Politics, I. X Рmy italics:

There are two sorts of wealth-getting, as I have said; one is a part of household management, the other is retail trade: the former necessary and honourable, while that which consists in exchange is justly censured; for it is unnatural, and a mode by which men gain from one another.

“Gaining from one another“ is, you would have thought, a feature not a bug of market exchange as of sex. But exploitation is intrinsic to haggling. We are better off with its demise, and let Walras rest in peace.

* * * * * *

Footnote
The other psychic benefit of industrial service is the lessening of rivalry between workers. The independent cotton-spinners are in anxious competition; the mill-workers are all in the same boat, and friendship and solidarity will help them stand up to the boss. Industrial employers still try hard to break down this solidarity and re-atomise the labour contract with individual negotiations and incentives, but their success in this is necessarily limited by their scale of operations.

Footnote 2
I seem to find myself thinking a bit about the linked issues of ideal communism and plenty, so I’ve created a search category. Some older posts here, here, and here.

Author: James Wimberley

James Wimberley (b. 1946, an Englishman raised in the Channel Islands. three adult children) is a former career international bureaucrat with the Council of Europe in Strasbourg. His main achievements there were the Lisbon Convention on recognition of qualifications and the Kosovo law on school education. He retired in 2006 to a little white house in Andalucia, His first wife Patricia Morris died in 2009 after a long illness. He remarried in 2011. to the former Brazilian TV actress Lu Mendonça. The cat overlords are now three. I suppose I've been invited to join real scholars on the list because my skills, acquired in a decade of technical assistance work in eastern Europe, include being able to ask faux-naïf questions like the exotic Persians and Chinese of eighteenth-century philosophical fiction. So I'm quite comfortable in the role of country-cousin blogger with a European perspective. The other specialised skill I learnt was making toasts with a moral in the course of drunken Caucasian banquets. I'm open to expenses-paid offers to retell Noah the great Armenian and Columbus, the orange, and university reform in Georgia. James Wimberley's occasional publications on the web

32 thoughts on “Against haggling: woolly thoughts on the pre-industrial mode of production”

  1. Some comments:

    (a) Tipping is an interaction which has something of haggling about it. Not as painful, no, but the same sort of uncertainty. There’s a reason I hate it and would prefer a society where the prices and wages were just 15% higher. Or, to put a slightly different spin on it, the lack of having to deal with tipping is a point in favor of a fast food restaurant over a sit-down restaurant, and one that actually weighs pretty heavily in favor of the fast food restaurant in my particular case. Similarly for staying in a motel rather than a hotel.
    Point is, remnants of this inefficiency are still with us.

    (b) I agree completely about the problems in clearing prices, and I don’t know how this used to be done; but nowadays it seems that it’s a lot easier to clear via the internet. There are a variety of mechanisms whereby inventory can be dumped at ever lower prices, through sites that are ever more painful to navigate. Clothing is another example where the trickle-down is pretty obvious as a garment moves from Nordstrom’s to Loehmann’s to Filene’s. I’m constantly amazed (and cheered) when I have occasion (for various friends I know) to search for something they may want to buy for business purposes, from cruise ships to pick-and-place machines to electron microscopes — there are web sites selling all of these second or third hand. A similar situation that may be familiar to many of us is the market for computer components, where it’s just standard, at least among the computer nerds of us, to buy and sell apparently junk hardware via the net. I have good reason to want to own three iPod nano third generation? No problem — I can easily find them. I want to buy a cheap MacBook from 2008 because I need a replacement LCD? EBay will give me many broken MacBooks to choose from, with explanations of how they are broken.

    I can believe the fruit and veg 10% number — they are perishable, and demand has some unpredictable fluctuation. But the 20% tire number strikes me as ridiculous, a plea for something (changes to the tax code, subsidy, whatever) or artificial scarcity to make some sort of point that is (at least believed) to make sense in the status goods market. If Pirelli actually cared, I suspect they could bring that number down to .5% with minimal effort. Heck, even Apple, who are obsessed with controlling their product sales and with rarely offering discounts find a variety of ways to sell off old inventory, from giveaways of old iPods when the school year starts, to selling older models to schools, to having a (hidden and unadvertised) spot on their web store for selling old and refurbished items.

    1. I was with you until you talked about Apple: hidden? You mean, that place where you scroll down the front page of the store and find it on the left?

      When you make that sort of comment, it colors the rest of what you say.

      1. It’s not a big point, but I consider it hidden and unadvertised. Very few people seem to be aware of it — everyone to whom I’ve suggested it is surprised that it’s there. Maybe hidden is too strong a word, but it’s not like Apple is playing up the “visit our bargain basement” line.

        1. Not to flog the horse too hard, but it is called out on the opening page of the store in BOLD, and has its own little special box as well. It would not serve ANYONE well that they couldn’t get rid of the excess, in fact not clearing inventory would be very expensive. That’s why I’m after you on this: you haven’t thought it out here. In your point 2, you talk about that it’s easier to clear via various 3rd parties on the web. But it is much better for a company to clear its own stock if they can do so expediently.

          1. I cannot understand what your point is.

            MY point is that it is easy for companies to get rid of excess inventory through the obvious mechanism of selling it at a lower price, that there are a variety of ways to do so, and that even a company like Apple can do (does do so!) in a way that does not seem to harm its interest of maintaing price and brand reputation; for this reason I do not believe Pirelli’s claim.
            The details of exactly how this is done are incidental and irrelevant to this larger point. If you’re Apple you do what I described, if you’re Coach you sell it at an outlet mall 30 miles from civilization, or offer it to your best customers with a 70% discount as a “reward for loyalty”, if you’re P&G you do something else (change the label and sell it to Costco?), if you’re a South Korean company you do yet another thing (sell it to a US 99c store where it appears along with other mysterious items covered in Arabic or Hindi or Greek writing?).

            I’m afraid I have no idea what your point is.

          2. Your point seems to be that companies necessarily distance themselves from their discount offerings in order to clear. I disagree. Some companies (Nordstrom, Apple) create very easily accessible ways to buy their left-overs (Nordstrom Rack, Apple.com/Refurbished), others choose not to (Macy’s->Filene’s, everyone to O.com). You appeared to me to be lumping to make your point, I was disagreeing, and making the point that this diminishes your analysis, when it is so easily disproved.

            John

    2. Michelin know their business, so it’s a priori unlikely they are just being incompetent as you suggest.

      Tiremakers depend on the replacement market for profits – carmakers are big enough to drive a hard bargain, and the factory choice of tires heavily tilts the replacement market. That has several special features: 1. Tires of different sizes are not substitutes – you have to fir the right size. 2. Tires from different makers are quite good substitutes. 3. For tires, different garages are very good substitutes. 4. The demand for replacement tires is highly variable across sizes. 5. Customers are not prepared to wait.

      Suppose I need a new tire, and the others on the car are Michelins. If the first tire garage I go to does not have the right Michelin, I will either go to another garage or buy a Goodyear. So tire garages must carry a wide range of sizes all the time; and tiremakers have a strong incentive to finance this for their own range.

      1. James, your points, while all valid, only explain why the industry needs to carry a larger inventory perhaps than other industries. It does not explain the supposed 20% loss of inventory, especially for something that neither ages (eg food) nor changes rapidly with fashion (eg clothes).

        Perhaps the problem is that someone somewhere is confusing inventory (where 20% of annual turnover would seem to me quite reasonable — maybe not what management wants, but understandable) with truly dead stock (items that are never sold an are destroyed or discarded)? (This seems unlikely, but I’m trying to be charitable here, and maybe there’s a translation issue somewhere between french and english?)
        The footnote on the second page only adds to the confusion, since the sentence “Consumers increasingly buy during the sales period, thus waiting for cut-down prices. The Michelin example illustrates the existence of a new empirical phenomenon commonly observed on various markets all over the world.” actually suggests that what the 20% refers to is excess that is sold at sale prices; again not dead stock but the issue I was referring to — ways of forcing clearing by reducing the price.

        All in all I’d say the footnote leaves me still unconvinced about that 20% and suspecting there is a confusion going on here; I’d appreciate a more definitive answer.

        (Being only human, I’d also note that the footnote, while not explaining the situation with tyre retailing, does validate my point re how high-end brands [at least those that know what they are doing] sell their excess inventory in such a way as to prevent the sales prices “tarnishing” the “standard” price. They DO manage to fiddle prices to force clearing; but they DON’T do it by the “obvious” method of simply reducing the price on items in the “main” store by 5% every week until inventory is gone.
        Apple [and occasionally other companies, though this is a rare situation], not that anyone mentioned it, also go in the other direction; they don’t raise prices even under conditions of extreme scarcity. We’ve had five years now during which iPhones (and sometime iPads) have been launched to long periods of insufficient production, and Apple has dealt with this via a variety of quota mechanisms (delaying launch in some countries, providing a registry on which to place your order for later, limiting the number of purchases per person) but, noticeably, not by what economists would suggest, of something like “launch at a price of $1000 and keep dropping the price by $50 per week till you hit the long term price you want”.)

        1. New, unused tires have a shelf life of about six years and probably should be discorded after that for safety reasons. Something retailers don’t always do. So those you’re buying on sale might be eight to twelve years. Good idea to check manufacture date, on sale or not.

          1. “Discorded” is nice in the context.
            I read somewhere that aircraft tires wear out so fast that on most flights you are landing on retreads.

        2. The alleged “Economist suggested” method of pricing is clearly a non-starter: Starting at an exorbitant price, and then deterministically lowering the price is guaranteed to depress sales, possibly fatally. In fact, even if the price drops are not deterministic, the first price drop will instill the (entirely justified) expectation in your customers that, if they simply wait, the price will drop further. Apple’s strategy of holding prices constant, even in the face of material shortages, is the only way to ensure that the buying customers will actually be motivated to buy.

          The other side of this strategy is that Apple rarely lowers the prices of entire product lines: they simply improve the specifications of the product line while keeping prices constant. You can buy the midrange model of product X for $1500 today, or you can wait till next year when the midrange model will have more memory and a faster processor, but will still cost $1500. This encourages the buying customers to make their purchasing decisions based on what they currently need, rather than on the expectation of a better price.

  2. “It seems like a lot of work to organize an orgy…” he wrote.

    Au contraire, to me it seems like a lot of fun.

  3. There is another reason for the demise of haggling: agency costs. Once the seller hires employees, rather than family, haggling becomes a fraught proposition for the seller, since the buyer and employee can strike their own side-deal at the cost of the seller. There are ways around it (usually high commissions), but they don’t work unless you have well-compensated employees. Single price is much easier to monitor.

    As far as the psychology of haggling, I think it depends on the haggler. My wife loves it, and esteems a good counterparty. There’s much more than money in the deal–it is like a mutual seduction, with the transaction as a consummation. It wastes time, but then again, so does seduction. I’ve noticed (again from watching my wife; I hate the whole thing) that little time is spent on low-value haggling. It occurs, but quickly. There is a certain economy to the process.

    1. My understanding is that some sales forces (cars, new and used; appliances) are often paid by commissions that aren’t all that high (or commissions that are high but still amount to low wages) – but the relative infrequency of transactions may make oversight easier.

    2. As James said, there are those who enjoy it and those who don’t. My feelings about it line up pretty well with how I felt about flirtation in my youth – I despised it. I can see my aversion to both as being as much about temperament as principle. However I’m not sure how much the latter is merely a rationalization for the former. Both have always felt dishonest to me, but maybe this is because my temperamental aversion leads me to prefer a reduction of both to more rational terms, thus precluding an honest subjectivity.

      Of course, not being able to do either well lead to a resentment of having to participate in a game that feels “rigged” against you.

  4. <>

    Hayek’s main point was not the coordination failure itself, but difficulties the Soviet-type system had with obtaining and processing information. The features of the Soviet economy you mentioned were the results of its difficulties of obtaining the right information. Why do you think the Soviet planners did not provide high-powered incentives for innovation? Was it because they were stupid? Maybe. But economists generally do not want to explain important systemic features by people’s stupidity. A more reasonable explanation would be that the planners did not really know which innovation were worth paying a lot for and which were not. There was no market to value these things. And if you have bureaucrats evaluating the innovations, you do not want to set the rewards for innovation very high. And, fo course, you do not want to have hard budget constraints if your prices do not reflect true relative scarcities, etc. The point is that you can explain all of the Soviet economy features you mentioned by the information problems highlighted by Hayek. And, of course, the defense sector successes relative to failures of non-defese sector and to defense sectors in market economies were there precisely because no system is particularly market-oriented in the defense sector and all systems face similar information problems in the defense sector. Finally, a key difference between the large corporations in a market economy and a Soviet-type system is that even the largest firm operates in an environment where prices (more or less) reflect true relative scarcities. GM’s costs and revenues (i.e., profit) reflect real economic values. It is unclear what is reflected in the profit of an enterprise in a Soviet-type economy. The fact that GM plans “inside” of it creates an agency problem, but that’s about it. Central planning destroys the understanding of true relative scarcities.

    1. You have a good point on innovation and information. The amount of sheer lying that went on in the Soviet economy was impressive – Goodhart’s law on speed. But it’s a long stretch from saying that real capitalist markets generate better information than central planning to the proposition that they approach market-clearing efficiency.

      I’m less convinced on relative scarcities. In manufacturing, constant returns to scale are the rule, so cost-plus is perfectly sensible. That’s how prices for thousands of small component widgets are fixed in capitalism for information reasons. Did Gosplan get the medium-run relative prices of such widgets seriously wrong? In the short run the absence of incentives to adjust outputs to real demand clearly led to shortages (and the strange under-the-counter quasi-market in which firm lobbyists persuaded planners to adjust quotas). But the flexible supply chain of modern capitalist carmakers works by constant adaptation of quantities, not prices.

      1. I am not saying that capitalist markets clear, at least not in the short run. There are all kinds of frictions. And Hayek actually was somewhat too optimistic about the “marvel” of the markets and flexible prices, although he did explicitlly say, “Of course, these adjustments [i.e., adjustments produced by price changes — Michael] are probably never ‘perfect’ in the sense in which the economist conceives of them in his equilibrium analysis.” But in the medium run, markets seem to work reasonably well in many, albeit not in all, sectors of the economy. And Gosplan got all kinds of relative prices wrong, not least of which were prices of labor and capital. In a traditional Soviet-type economy many prices stayed constant for years. So, even if they were reflective of something real initially, they would soon lose that property. As for incentives to adjust output to real demand, I think this is a wrong way to think about it. Other things equal, quantity demanded is determined by prices. If prices are “wrong”, then adjusting output to demand would be a really bad way of eliminating shortages. Adjusting prices first to make sure they are at least close to true relative scarcities would be a much better approach. So, if the planners were not willing to let markets set prices, prices would surely deviate from true relative scarcities, and the planners *had to* tolerate shortages at least in some markets, if not in the aggregate. In fact, the whole point of the Soviet-type economy was not to let markets guide production decisions. And this naturally implies that some things would experience excess demand and some might be in excess supply.

        1. If compensation for wage labor goes down to reflect relative abundance of labor or even productivity improvements, then how can the market clearing price for wage labor will ever provide a living wage for the workers to buy all the products produced in this ideal capitalist economy?

    2. I’m more on James’ side in this debate: not Hayek and his decentralized information, but Milovan Djilas, and his rotten incentives.

      If the problem were lack of usable information, Soviet communism’s economic performance relative to capitalism should have improved with increases in computing power over the 1950’s and 1960’s and 1970’s. Instead, it got worse and worse. Even if centralized systems are inherently inferior to decentralized systems, a computerized centralized system should look a lot better than a paper-based one. (Remember, computers did not become decentralized until the late 1980’s.) And large centralized systems often perform very nicely in the appropriate context: Toyota, the US military, the UK NHS.

      1. Computers help information processing, but technological progress makes economy so much more complex and makes change and adaptation to it more important. The balance of these things is unclear, but I strongly suspect that it is precisely techological progress that increased economic complexity and the speed of change that was one of the main reasons for the collapse of the Soviet systems.

  5. This reminds me of a story told to me by a friend who visited Morocco. He decided to buy a small prayer rug as a souvenir and went into one of the shops. The initial price was $200 and he offered $15 etc. He said the haggling went on over several hours with him leaving and then coming back and then leaving etc. After much effort they finally arrived at a price of $75 and he bought the rug.

    As he was leaving the shop keeper suggested he should buy a second rug as well. Also $75. No thanks. $70. No thanks. $50 No thanks. By the time he left the shop keeper was down to $5.

    And the worst part, my friend said, was that he then had to lug the rug all over the place because he had paid so much for it.

    1. Personally, i prefer buying rugs at Ikea. They have gone to the opposite supermarket-cat-food extreme. You face a pile of quite big oriental rugs, with informative labels, and zero staff. The only problem is that you have to shift the things yourself to get a look at the ones beneath.

    2. Of course, another variable regarding the price a shopkeeper would be willing to sell his product for might have nothing to do with his cost, or necessary profit margin. He may owe a gambling debt, or be a drug addict, or be past due on his rent. So, his urgent need for cash today might trump the necessary price his products should sell for in sustaining a healthy business.

      1. True, but there is no need for anything sinister to be going on. Cash flow is a constant concern for many businesses, and the need to raise cash will often influence pricing.

        It’s interesting that both car dealers and rug sellers, for example, have large and expensive inventories. Those inventories need to be financed, and interest bills paid. That would, I think, account for them wanting a lot of flexibility to price merchandise based on immediate cash needs. Haggling is one way to do that.

  6. I shared a house with Moroccans. When some of us visited the place, we were told not to take too overt notice of something we wanted, but to tell our Casablancan Moroccan friend, who would then buy it – foreigners paid more. In Rabat or Marrakesh, you told the friend, who told his Marrakechi friend (out of towners paid more).

    In Asia in the 70s there were several different bargaining systems, and you had to know the rules. In India, the opening price was almost always 120% of the “tight” price, so the haggling was over a narrow band (and there were things which were non-bargainable – demanding or offering other than the set price was a major breach of manners); in Indonesia, higher status people paid more (so by bargaining too hard you were devaluing yourself), in Iran, it was rude to haggle too much, in Afghanistan there always seemed to be a threat of force hanging in the background. Bargaining is almost never just about price, it’s about all sorts of other signals as well.

    BTW, the Soviet Union did get weapons and related military items pretty right – I presume the feedback was more direct. It’s not that they couldn’t make good shoes, it’s partly that they wwere not really interested in doing so.

  7. Thanks to commenters for the number and quality of your responses. Now this rug isn’t for sale, it’s a family heirloom and they don’t make them any more, and it breaks my heart to part with it, but as a mark of my thanks and esteem I’ll let you have it for only ….

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