Monday, August 5, 2013

Fuzzy Math

I meant to write about this earlier...because it is insightful into the Kenyan economy.

Kenya has the perfect economy...people pay what they are willing to pay for a service or item and the seller sells it for what they are willing to sell it to you for.  Everyone is happy.  It is a sliding scale...some people pay more...some less.  (disclaimer:  I'm not an economist).

Two weeks ago, I stopped in Narok to purchase two boxes of wine...a red and a white.  Boxed wine is an essential research supply because you never know when an unexpected guest will stop by your camp.  We may live in the bush and go for days without a decent shower...but we'll always greet you with a nice glass of wine if you stop by.  If you do stop may have to help process samples or perform some preventative maintenance on the truck...but you'll get a nice glass of wine.

In Narok, and most places in Kenya (except the large supermarkets like Nakumatt, Tusky's, and Naivas), there are no price tags on anything.  You negotiate the price.  You pay what you're willing to pay for the items and the seller sells them for what they are willing to sell them for.  That's why it is important to know what things cost and what your'e willing to buy it for.

I asked the seller, "how much for two boxes of wine, one red and one white."  She said, "6,000 shillings."  I knew that one box of good wine would cost between 2,000 and about 2,600.  I was willing to pay no more than 5,000 shillings.  But of course, I don't tell her this....and she doesn't tell me the lowest price she is willing to sell them for.

She was aiming high.  They always start off high...because some people will immediately agree to that.  But, I wasn't willing to pay that much because I couldn't afford it.

So, I shot low.  "I'll pay 3,000 shillings."  She laughs.  I laugh back.  I knew that it was ridiculous to think that I could buy two boxes of wine for 3,000 shillings...but you have to start low...but not too crazy.

She starts to tell me how expensive these boxes of wine are and how much it costs to bring them to Narok.  She says, "I can go no lower than 5,900 shillings."  She then converses in swahili with her colleague, some of which I understand.

Now...the fuzzy math comes in.  All shop keepers will have a handheld calculator.  Usually, one of those solar powered ones.  They will always punch numbers in make it seem like they are making legitimate calculations as to what the price should be. In reality, they are just trying to justify their elevated price to you by backing it up with a calculation.  Sometimes...this can work to your favor.

I told her that I always buy my wine in Nairobi for 2,000 a box and I would be willing to come up a little bit since this is Narok.  That wasn't totally true, but since I'm the buyer, I have to keep shooting low but show that I'm willing to come up a little.  

She then gets her calculator out and demonstrates to me that she cannot sell it to me for lower than 5,900 because she pays 2,400 for the red (punches it into the calculator) and that she pays 1,900 for the white (punches into the calculator).

This comes out to 4,300.

I ended up giving her 4,500.  She came down from her initial offer of 6,000 and I came up from my initial offer of 3,000.  We both negotiated to find the ideal price I was willing to pay and the ideal price she was willing to sell it for to me.

A perfect economic transaction.

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