Wednesday, September 14, 2011

Taxis know best: economic and negotiation theory.

Payment for taxis -- like everything else on this continent -- is determined through haggling. The cost depends on where you're going, so costs end up falling into tiers based on the zone of your destination. A trip to the NE district across the river will run you around 2000 CFA (~$4.25), while a hop down the road can cost anywhere between 200-500 CFA ($0.50-$1.00).

Taxis are so inexpensive that arguing over price would seem silly, but it's more the principle of the matter: it's about defending against the assumption that all foreigners are saps and should be charged 3-5x the normal amount. Just this morning, a driver quoted me 1500 CFA for a trip that should cost around 300 CFA. I laughed at him and eventually talked him down to that amount. The amusing part was that he told me that I should be paying 500-1000 CFA, that I don't understand how this all works, that he's taking pity on me because I'm a foreigner and cutting me a deal. (At least, I'm assuming that's what he said.) Sure, guy, whatever you say. You know best.

It is important to not be ashamed to take back money given to a person when there is a disagreement about the final price. Take this morning's ride as an example. Originally 300 CFA, I handed him a 500 CFA coin expecting change at the end of the ride. He argued that it should now be 500 CFA because I misdirected him slightly. When he wouldn't budge, I just took back the coin and handed him exact change. He smiled at me appreciatively, respecting the street smarts I've developed in negotiations.

One must be wise, of course, to set a price before getting in. This would likely be a common mistake of foreigners accustomed to being presented a fair and set price at the end of the trip. Your negotiating position is severely undermined once they have rendered a service for you. In negotiation theory, this pertains to your BATNA, or Best Alternative To Not Agreeing. Before you ride, you can always walk away and hail another if the taxi driver demands an unreasonable price. After you ride, that luxury is no longer possible -- unless you want to incite a fight and possible arrest. The act of walking away is a powerful hand to force in negotiations, especially in Africa. People consistently set higher prices for foreigners, taking all whites to be rich people, but they are more than willing to settle for 1/3 to 1/2 the quoted amount. After all, it's either get paid less or not get any business. It's leveraging the internal greed and desire of the person providing services. The cost of conducting business and the value of manpower is so dramatically undervalued, it's pretty easy to negotiate a significantly lower price.

This differs considerably from almost all retail businesses in the U.S., where if you're not willing to pay the price, too bad and you can go somewhere else. When you think about it, this is an impressive phenomenon. Businesses eradicated individualistic thinking for the sake of keeping prices high. That this standard developed without outright collusion strikes me as remarkable. As long as haggling is the M.O. of transactions, costs can fluctuate based on factors such as charisma, bargaining power, and personal economic stability.

But I digress. I was talking about taxis.

Taxis all know where everything is -- until you get in the car. Five minutes later, they're pulling over to ask for directions. This behavior does not exactly inspire confidence in the navigation abilities of the driver. After all, they are just asking any random Joe (what would be the African equivalent of "Joe"?) on the street, who may be equally clueless or acting on vague recollections. I am torn between not saying anything in the hopes that eventually we will reach the destination, and risking the suggestion to ask directions because I have a feeling they're not going the right way. It doesn't help when you don't speak the language, so you are powerless to argue with the taxi driver for a discount when they get you hopelessly lost. A taxi ride that takes twice as long as normal will still cost you the same amount. (This happened to me; a 45 minute trip turned into a 1:30 ordeal.)

One other aspect of taxis to note: they stop on personal business all the time. Without even asking, they will pull over to buy gas, purchase some milk, or stock up on phone credit. Most take a couple minutes, but they add up. I was tickled by the thought of a taxi driver in New York trying to pull the same stunt; the Wall Street executive riding shotgun would probably rip him a new one. Time is such a fluid and undervalued notion in Africa.

Enough talk of taxis and economics. It's time for my dance lesson.


Ben said...

Keen observations. What are the social norms around tipping?

Andrew said...

Nonexistent. However, I haven't been to a proper restaurant in the past three months. At best, I'm eating at a patisserie where they have an entourage of workers to ferry orders. There may still be a tipping protocol for upscale places.