Negotiating with Street Vendors: An Anecdotal Case Study
This past summer, I went to Guadalajara, Mexico to visit my family. Apart from staying at my grandmother’s house and playing with my young cousins, one of my favorite things to do in Guadalajara is visit the “Mercado de Abastos” or the “Market of Supplies”, the big street market in the city. A major part of the experience of buying items from vendors is negotiation. When I was younger, I remember seeing my parents bargain with vendors over different items not really understanding what was going on, but as I got older, I began thinking critically about the process and began negotiating with vendors myself. Considering my experience and that of David Huff, a man who blogged about his time haggling in markets in Mexico, I’d like to examine negotiating with street vendors using some concepts we’ve thought about in class.
A buyer may have different goals in negotiations. First off, you may not want to negotiate. Maybe you don’t want the hassle of arguing with a stranger and you decide to just comply with the posted price. While the posted price may be higher than your valuation of the item itself, your valuation of peace may create an overall positive payoff. Assuming you wouldn’t want to pay more, you should just pay the posted price.
If you want to negotiate, you most likely want a (greater) positive payoff – you want to pay at or below your value, but you may have different specific goals. You may want to buy the item for as low as possible, you may just want a deal with a surplus, or you may be content with buying it at your value. It’s also important to consider the view of the vendor. The vendor wants the highest positive payoff possible too; that could mean maximizing profit, cutting losses, or some sort of happy medium financially but the addition of a social gain (with the prospect of future gain).
Negotiating with the street vendors, you usually start off low. You want to set expectations low and numbers low so you can keep playing low. You don’t want to bid too low, though. If you insult the vendor, the negotiation will probably not end well for you. So you bid low and the vendor returns with a counter-offer. In this situation, the strategy of negotiation can resemble that of an ascending price auction. You begrudgingly bid higher until the proposed price reaches your value. You want to keep bidding below your price. If you want to buy the item at your value, you keep offering increasing prices lower than your real value until either the vendor agrees, or it reaches your true value. If the negotiation reaches your true value without the vendor agreeing, you move on to the next stage. If you wanted a deal with a surplus, but the vendor won’t agree to a price below your true value, you move on to the next stage. If you wanted the item for as low as possible but feel like the price the vendor is giving you isn’t his lower limit, you move on to the next stage.
For me and David Huff, the next stage is walking away. David accurately describes, “If they persist in offering no discount, just raise your hands in a bit of frustration, say gracias and start to leave… You most likely will hear them shout a discounted price or they will come after you to bring you back to their stall for a sale. Better to have a few less pesos in their pockets than to have to re-pack all of their goods and carry home unsold items.” The vendor wants to make a positive payoff, so he is willing to cut into his surplus or cut his losses. You come back to their stall and try again to reach your price goal. Usually, this stage is successful. If not, this leads to the following thought: “I could buy this somewhere else.”
You may want to go to the next stall with the item you desire. Here, it may be helpful to think about relationship networks. First, it matters if this second vendor is aware of your situation with the first vendor. If he is, the Strong Triadic Closure Property may apply. We will assume he will stay true to the nature of his relationship with the first vendor (will stay on his side if they are friends or may be incentivized to offend him if they are enemies). If he’s friends with the first vendor and saw that you became “enemies” with him, he will want to be “enemies” with you so he is less likely to be agreeable and you have a lower chance of getting the price you want. If he’s “enemies” with the first vendor and saw that you became “enemies” with him, he may be incentivized to be “friends” with you so he is more likely to be agreeable and you have a higher chance of getting the price you want. You can start negotiating and continue the above process.
A few other solutions may be asking a local to buy a good for you as vendors may have different price limits for different types of customers — depending on their perception of their customer’s maximum possible payment size. You may also give him another incentive to help you – you may represent the possibility of future gain; if you plan to come back or bring others, the vendor may be more willing to help you. This may be similar to the concept that “when negotiators expect a role reversal, they are likely to make more concessions and reach an agreement more quickly in the current negotiation” (Walking). While your roles aren’t strictly reversing, vendors believing you can offer or almost “sell” them something of value in the future may make them more agreeable. One last notion important to consider is that these vendors have families too, so while intense strategy and determination to win may be exciting, it’s more important to, as David puts it, “respect the time and labor sellers put into their products.”
Works Cited
David Huff, Price Haggling at the Tianguis in Mexico: https://www.expatsinmexico.com/price-haggling-at-the-tianguis-in-mexico/
American Marketing Association, Walking in My Shoes: How Expectations of Role Reversal in Future Negotiations Affect Present Behaviors: www.jstor.org/stable/pdf/44134849.pdf?refreqid=fastly-default%3A53b00a1a8f68871e38857bf43f76975a&ab_segments=0%2Fbasic_search_gsv2%2Fcontrol&origin=search-results