Thursday, December 27, 2012

Does a "Haggle" Norm Make Euvoluntary Exchange Impossible?

A friend of mine, WH, is an insurance guy.  Economist, but works for a living.  Anyway, he sent this email, which I edited slightly, as noted with brackets [ ].  And I added emphasis to the word "unfair":

Several years ago was interviewing several taxicab drivers of a large taxi operation we insured. All were immigrants from the middle east. We were discussing price and I mention US "posted price" was not the norm where they came from that "haggling" was the norm. Had been to North Africa and seen the phenomena myself.

These guys were astounded that I was acquainted with the price haggling behavior of their home countries. Was now their new best-est friend! They added some insight. Apparently "haggling" is a male
 [rite] of passage and considered an art and an art that differentiates one's manliness. Better the haggler, better the man.

However, they were not done. The "better the haggler, better the man" leads to a problem. Both sides of the finalized transaction feel like they should have done a better job of haggling (been a better man). That anomocity arises toward the other party in the transaction as both parties blame the other for unfair haggling. That is, the other party is at fault for the other party's inability to get a better deal through haggling.

That is interesting because it runs against the idea of mutual self-interest at exchange and the pie
[changes]. The two parties in the haggling case leave the transaction in a zero sum mode in a weird way as both parties think the other party gained at the other party's expense.

Several interesting things here.  What does "unfair" mean?  As Duke department chair for ten years, I was often accused of unfair haggling.  "Fair" seemed to mean "give me everything I want, now."  Anything else was "unfair."

And, note how the haggling itself becomes an end, not a means to acquire a service or commodity.  If haggling is the point ("Wow, will you look at the size of HIS haggle!"), then the conditions for euvoluntary exchange are not met.  My gain is your loss.  But I think there are two separate things going on.  One is the transaction (I want a ride, you want money), and the bargaining space is non-empty.  But after the ride, we argue and wave our haggles around in plain sight, so people can admire them.  One person wins, and the other loses.  Is the net effect better, or worse, than a fixed price?  Would haggle-obsessed countries be better off if a single-price regulation were imposed?  Is this a PD problem, in which all would be better off (on average) if haggling were outlawed?


  1. How is this any different than a search for the truth through adversarial process in a courtroom? Isn't the ultimate result a fair or just price for both hagglers?

  2. An interesting point, and one I had not thought of. I would have said that the legal system, particularly on the civil side, was a means of forcing private settlement by having a predictable way of adjudicating disputes that are not settled.

    And if haggling were JUST a means of settling on a price, and the two participants were about equally matched in terms of bargaining position, then yes, Sid is right.

    But if the haggle itself becomes the end, not the means, then one person wins and one loses. The loser would have been better off not participating in the bargain at all, so access to the bargain makes him worse off than his outside option. That is how I read the example: haggling becomes a martial skill, a combat, with a winer and loser. The actual transaction is incidental.

    Now that you mention it, though, Sid, your point is a deep one. The combat in the courtroom may not be a means of solving the problem equitably (here are the damages, here is the court costs, here is who pays what...), but rather a martial setting of good vs. evil. I may spend a foolish amount, or forego a foolish amount, to impose costs on you. I might spend thousands of dollars to get a judgment against you that pays damages of one dollar, for the sake of getting a "victory," of being vindicated.

    In and of itself, that's okay, but if the legal system is overrun by such nuisance suits and SLAPP suits, then the legal system is not a means of resolving disputes, but an end in itself, a way of imposing costs and humilation on other people. There is a winner, and a loser. In a euvoluntary transaction, there are two winners. This is different, and thanks for the great insight about courts!

  3. Haggling : Anonymous Exchange :: Civil Law : _______________?

    In the absence of status-driven posturing, civil courts exist to cover instances where the resolution set of Coasean bargains are null. Exchange, whether it's the result of actively negotiated trade or mute offer and acceptance assumes a non-null bargaining range.

    Haggling is functional when it splits surplus. Courts are functional when they split losses. How much of the benefit is dissipated in haggling or how much pain is amplified in litigation can (perhaps?) be included in expectations.

    I would guess that it's probably easier to reform the tort rules than to switch the informal institutions that result in a haggling-intensive society. I'm not sure what, if anything, this says about the relative advantages of the political process. Governments are better at enforcing the rule of law than at, say, redistributing wealth, but does this imply that the state can just up and change an informal institution like haggling with the stroke of a pen?

  4. Haggling seems to be both a means and an end. So "the [haggling] loser would have been better off not participating in the bargain at all" is suspect for two reasons. (1) He got his "end", either the money or the ride. (2) The classic reason: he's an adult; he knew exactly what was going on and could have walked away, but he didn't.

    I think I can read minds: I see people choosing between alternatives and I just know (somehow) what they prefer!

  5. Today I haggled. A tradesman came to install satellite internet. When he finished, it sorta worked, but not like I wanted. He wanted $100 to "configure" for me. In five minutes, I haggled him down to $0. When the thing worked like I wanted, I gave him a $20 tip. Who won?

  6. Two thoughts:
    First, the Quakers were among the first to have a policy of menu price and they did so on ideological grounds of fairness.
    Second, Graeber has some good stuff in Debt on haggling. (This is one of the few places in the book where he draws directly on his field work in Madagascar).


Do you have suggestions on where we could find more examples of this phenomenon?