Wednesday, July 15, 2009

Haggled and Bedraggled with Motorcycle Cartels


Posted by John
Mornings in Medan often begin with a motorcycle taxi ride. But the trip doesn’t start without a little haggling, a ritual with maneuvers that rival Japanese kabuki for intricacy and inscrutability. Bargaining pervades Indonesian culture, whether you’re buying mangoes at the traditional fruit market or boarding the carriage attached to a motorcycle taxi.

Whenever feasible, Danielle and I avoid situations where haggling plays a major role. Parties on both sides of the transaction often make unflattering snap judgments about each other. Language and cultural differences create confusion, and the tone can descend into hectoring. The whole exchange takes on the feeling of combat, where the stakes become less about fair prices and more about conquest for either a smug merchant or a self-satisfied customer. It’s even worse when both parties seem to be airing grievances across socioeconomic and historic lines, and a basic need like traveling across town becomes a commentary on neocolonialism. Opting out of the bargaining process by shopping at more expensive stores comes at a premium, but piece of mind is often worth what turns out to be equivalent of a few extra few cents.

Cross-town transportation in Medan, however, is not a market with many options. Without easy access to public transportation or a car of our own, we are at the mercy of the becak (motorcyle taxi drivers) that convey people across town. When we were staying in Surabaya and Yogyakarta, we primarily took non-motorized bicycle becak between well-traveled destinations near the center of town. When we didn’t like the price, we could almost always walk away and find another driver. Now that we’re living on the outskirts of Medan, however, there are far fewer drivers, the distances are greater, and the drivers who are in our neighborhood seem to be in cahoots. Any attempt to walk away to find a better deal will turn into a fool’s errand, a fool’s errand on uneven sidewalks and in 95-degree heat.

When we want a ride to the college where Danielle meets her research team, we approach the gaggle of drivers gathered at the end of our street. These three or four drivers are independent operators, but lately they’ve been demonstrating the iron discipline of a cartel. After cornering the market in one of the nicer neighborhoods in Medan, they zealously protect their turf. One becak driver that brought me back to the neighborhood tried to pick up another passenger, only to be shouted down by the assembled members of the neighborhood racket.

The haggling begins when a passenger explains the route and makes an offer. For Danielle and me, this offer comes after a bit of well-intentioned market research. We want the driver to be well-compensated, but not to make out like a bandit. We’ll be facing these drivers every day for the next few weeks, so it’s in our interest to avoid the reputation as the foolish foreigners who don’t know the value of the rupiah.

Our neighborhood research informs us the going rate for the 2.5 mile-ride to campus is 12,000 rupiah ($1.20). That doesn’t sound like much, but government subsidies bring the cost of gas down to $0.90 per gallon. A motorcycle gets more than 40 miles per gallon, so drivers taking us are easily covering the cost of a nickel worth of gas. Under these conditions, becak make a decent profit for ten minutes of work in a country where most people subside on less than $2 a day.

When Danielle presents an initial offer for 12,000 rupiah, the becak often recoils as though presented with spoiled fruit. He can’t possibly drive all the way to that part of campus for less than 20,000 rupiah (about $2).

Danielle’s face registers shock and horror in return. She retorts, “That’s way too expensive. The normal price is 12,000. How about 15,000?”

The becak engaged in negotiations will often turn to his comrades in search of affirmation. In that moment, the cartel does play a certain enforcement role. Overly ambitious demands from an individual driver are nixed.

“20,000? No, 15,000 rupiah is the right price,” the crowd will affirm.

At the same time, the curbside cabal also establishes certain baselines that no amount of customer bargaining, however well-reasoned, will budge.

“15,000? But I can travel twice as far for 20,000 rupiah when I’m coming from the other direction.”

“No, 15,000 rupiah is the right price.”

One solution would be to pay the premium willingly, acknowledging a sort of transportation noblesse oblige. But if two or three dollars extra in daily transportation sounds trifling, it adds up over the balance of a few weeks. Plus it’s not clear that agreeing to a higher rate ensures an end to the haggling. The sliding scale may just keep sliding. A few days ago when Danielle immediately volunteered the higher 15,000 rupiah price for her standard commute, the driver mischievously suggested, “Unless you want to pay more...”

At moments like these, I try to dismiss haggling for taxis as a trivial nuisance, maybe even embrace it as a modestly entertaining form of sport. Yet years of reading The Economist have instilled in me the unfortunate instinct of trying to understand the pricing mechanism involved, and that’s when the strange calculus of determining taxi rates confounds me. An outbound trip to one destination costs 12,000, but then the return trip costs 15,000. Today’s trip, easily twice as long as yesterday’s trip, ends up costing the exact same amount.

We’re getting better at discerning the subtle market mechanisms that cause rates to fluctuate. Trips to and from tonier parts of town cost more than equivalent trips in other parts of the city. Also, since Danielle is going to and from a university, there seems to be an assumption that she’s a professor who can afford higher prices. Fares are easier to pick up in some parts of town, so when you go to those busier destinations you seem to get a discount. Regardless, no matter how much better I am at deciphering the logic involved, I remain mystified. The Indonesian becak awaits the economic game theorist that can crack his code.

Since Danielle’s research involves immersion into Indonesian society, she wants to develop a fluency in the language of haggling. When she fails to avoid what she calls the “bule markup”—the extra premium attached to the price for white foreigners—she feels relegated to the periphery of Indonesian society. After fielding a particularly unfair offer the other day, she broke into her best Indonesian and said, “I may be a white foreigner, but I’m not stupid.”

It sounds wittier and less offensive in the original Indonesian, as the howls of laughter from the crowd of other becak drivers will attest.

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