Who's the man

Thursday, September 27, 2007

Experiments in Microeconomics

I'm not much of a shopper, but my last trip home I joined my mother in her regular trip to the local fruit market. Bananas, the tiny yellow ones, my favorite, I thought I should do the dealing, after all, I'm about to become a businessman:
"How much?", I asked.
"20 Rs. a dozen".
"Come on, Man, we'll buy if you give us a better price."
"No Sir, the prices are fixed", already packing 12 bananas for us. My mother was searching her purse for a 20 Rupee note.
Something is wrong. The market is perfectly competitive. The consumer's supposed to be the king. I'm supposed to get the best price in the market, something to do with marginal cost. I referred my night-before-the-exam study of microeconomics, mentally drew the demand and supply curves and concluded, that I can exercise my consumer power now, and force the retailer to oblige to my price decrease request.
"So you won't give us a good price? I'm tempted to try elsewhere."
"Sir, my prices won't change."
Sensing I still have the "quantity" variable in my control I said,"In that case, I just want half a dozen bananas", expecting the retailer to say, "OK, Sir, take the dozen, pay Rs. 18 (or 19)."
He didn't. He said "OK, half a dozen you want, half a dozen is what you get."
My mother adjusted her search, now she just needed Rs. 10.
I was baffled. Lost my 1st assignment on price negotiation and now I had to go and haggle with another retailer for the other 6 bananas that we needed.

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