For Elvis Presley, it was love. (See here.)
In Jerusalem’s Old City, we walked through the shuk. It is always a remarkable experience, like Aladdin’s Agrabah come to life. We went from shop to shop, and bought largely trivial things at largely trivial prices. But in the pit of my stomach, I always knew I wasn’t good at this. Although I grew up watching my father constantly dicker over countless purchases, and not only at flea markets, this is apparently not a dominant genetically transmitted trait. I never liked it. I hate buying cars, and I do so rarely, typically driving them 10 years or into the ground, whichever comes first. I experience similar buying anxiety, albeit on a much smaller scale, at the shuk.
When teaching my Law and Economics course, I cover a famous pair of cases that involve an American contract doctrine known as “unconscionability.” The case results and doctrinal formulation are hardly a model of precision, but basically the doctrine allows a buyer to void a contract whose terms are so unbalanced that the contract itself manifests the parties’ “unequal bargaining power.” The doctrine has famously been used to invalidate contracts for the sale of furniture with a “dragnet security clause,” which allowed the buyer to reclaim not only the recently purchased furniture on buyer’s default, but virtually all previously purchased furniture that under the complex contract terms were never fully paid down, see Williams v. Walker-Thomas Furniture Co., 350 F.2d 445 (D.C. Cir. 1965). The doctrine was also used to invalidate a costly contract for dance lessons in which the purchaser was grossly misled to imagine having been afflicted with great talent that would benefit from endless training, see Vokes v. Arthur Murray, Inc., 212 So. 2d 906 (Fla. Dist. Ct. App. 1968).
Although I think that there are sound alternative reasons to support these results, I encourage my students to question whether the “unequal bargaining power” formulation holds up. Are we better off in a world with constant dickering over the price, or instead in a world with countless take-it-or-leave-it contracts on fixed terms, with fixed prices. In the latter world, we have no “bargaining power” at all, that is other than the power, as Nancy Reagan famously said, to "just say no," see here. Instead, we confront a constant stream of contracts from which to choose.
I am confident that I prefer the latter form of bargaining. I’m also confident that consumers are almost always better off that way. In robust markets, characterized by such fixed-term contract offerings, buyers are far more likely to get their fair share of any transaction surplus, the gain created as markets move goods and services from those who attach a lower value to them to those who value them more highly. In such markets, both sides benefit by eliminating costly dickering, which is typified by asymmetrical information that ironically makes bargaining power quite unequal. More importantly, robust market competition drives prices down, giving buyers far more bang for the Shekel.
To me, going to the shuk is like going to a casino. I just assume I won’t get a good deal. The house always wins. The shop owners deal with thousands upon thousands of suckers like me; I’m armed only with my rather stupid rule of thumb: “offer them half of what they ask,” I tell my children. That usually works. If it doesn’t, we leave, at which point they offer half the original quote. But I know they see me coming. As we enter the shop, in Hebrew, Arabic, or Armenian, depending on which shop, they are whispering (just to be sure that my smarter, bilingual family won’t catch it), “Here comes an American, quadruple the price!”
Gambling is fine if you aren’t an addict and if you view it as a fun game that you anticipate losing. Unless you can count cards and somehow get away with it, you only get in trouble if you think you can win.
As for me, “my hands are shaky and my knees are weak” when I have the vague sense of being ripped off. Somehow, it’s a feeling I can’t shake, even over the price of a t-shirt!
As always, your comments are welcome.