If you’ve traveled in a developing country, you’ve probably been in a situation where you need to negotiate a price. Actually, you’ve probably been in this situation hundreds of times. Whether it’s a taxi ride or a souvenir, in many places in the world it is perfectly normal and expected to negotiate for a price.
Many tourists and travelers have trouble with this concept. Depending on where you are, the item in question might only cost a few bucks at the most. But to that local shopkeeper or taxi driver, it could be a lot of money. Why not just give them that little extra that they are asking for? What’s the harm? They need the money, and they are supporting their families, right?
At the risk of sounding like a totally stuck-up snob, there are actually some very good reasons why you need to be negotiating for the things you buy in developing countries. At a personal level it feels good to give a little extra, but from a macroeconomic perspective, you are actually doing more harm than good. (more…)