I hate it. I am terrible at it. As a consequence, I bought nothing in Turkey other than tickets to various things, room, food, and a poster of Ataturk. And I overpaid for all of these things, I’m sure, which has left me a bit bitter about the place. Surely this is inefficient overall, no? 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. In the world of Wal-Mart, when it comes to divvying up the surplus from exchange, the retailer has very little freedom to try to take you to the cleaners, but profits by assuring you that you will win the argument.

Author: Will Wilkinson

Vice President for Research at the Niskanen Center