Bargaining, Prices, and Supply and Demand.

Thailand's hundred Baht bill is hot pink - hot pink so sweet it will give you headache.

Money’s not the same in Thailand, however, or, better said, buying things is not the same. They bargain. Even in the malls, with shiny price-tags, you can squeeze the assistant for 10% off.

To the fresh fish, this is a primitive game, and to those going through a six or seven month slump, during those two weeks, bargaining seems down right stupid. However, considered theoretically, bargaining actually leads to maximizing the fine-grain price structure, leading to greater value capture, therefore greater entrepreneurial profits, and therefore greater net addition of social value.

(“Of course,” you’ll say with the grin of someone who doesn’t actually mind being scammed, “a net transfer from the tourist purse into the Thai.”)

We are used to one price in the West. If we want expensive things we go to Gucci, if we want a deal we go to Ross for Men. We sort ourselves into our price category, and we are always on the look out for a deal. However, this ignores the little differences between people, and the big ones.

If the individual supply-demand-indifference curves of each individual customer could be taken into account (and largely it can be through a seller’s sixth sense and acculturated biases), then the result will be a more perfect reflection of individual subjective evaluations of goods and the inter-subjective money-relative evaluation of goods—or in other words, optimal pricing.

It hurts our western sense of fairness if someone who looks wealthy is overcharged for what someone who looks poor can buy. Looks are so superficial.

Yes, and no. This is not 'soaking the rich' through 'progressive taxation.' If rich people make voluntary exchanges at higher prices than someone else there is no injustice, and there are many positive social outcomes. 

The social outcomes of this is greater employment, because there is a greater profit margin, and even assuming a diminishing return on labor (which is not usually the case) more people would be employed to increase productivity and therefore net profit.

Another social outcome would be a more egalitarian distribution of real goods. It can be argued that the rich value money in abstract more than poorer people, but, in a concrete sense, the rich (who have say 100,000 dollars) do not value one dollar more than a person with only one hundred dollars. The person with one  hundred dollars might value other things more than his dollar, but the dollar to him must be more valuable to him, on the margin, than the dollar to someone who is flush with cash. 

Bargaining brings to light that supply, demand, and indifference curves are never and can never be known. Even looking at past historical data, all you see is prices and sales, and those are just averaged aggregates of single points. No line can be given from a single point, even a straight one; moreover, each individual customer has their own different demand and indifference curve, and each producer (even an individual sales person) has a different supply curve.

These curves are part of a Cartesian seduction that confuses the young and conditions the reasoning of the grown.

Think twice before you wince an understanding smile at the brown person haggling with you. But more importantly, think twice before you believe those economics text books (and teachers) who tell you "This is a supply curve. This is a demand curve."