Stories | October 29, 2009

Market forces

Why braving markets on a busy day may pay off.

Shoppers who go to markets looking well-groomed or with children often have to haggle over price from a higher starting point, new research claims.

Market sellers push up the starting price for some
Dressing up to go to the market could end up costing shoppers more. University of Chicago economist John List wrote in The Economics of Open Air Markets - published as a National Bureau of Economic Research (NBER) working paper this month - that prices in markets were usually determined by haggling. There was a "statistical discrimination" based on the type of shopper for goods with "a certain amount of haggle", List found.
"The well-dressed seem to meet higher initial offers as do Caucasians; especially those who have kids by their side and are shopping for children's goods."

Shoppers may get a better deal in markets on busy days
List used various methods - including a "mole" informant - to investigate collusion between sellers in open air markets in the United States. The agreements involved sellers setting an agreed amount between each other that the goods would be sold for, which could effectively drive up the cost for shoppers. But List's discoveries could help shoppers get a better price. He found sellers were more likely to break their arrangements with other sellers on busy days.
List noted the value of goods sold in open air markets was significant. He wrote the 2005 figure from the National Flea Market Association in the US of sales of US$30 billion from 2.25 million licensed vendors was a "vast underestimate" as it did not include sales by non-licensed sellers.

eZonomics team
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