The Economic Power of Costa Rican Taxi Drivers

So a while back (in the winter break) I visited Costa Rica with some family and friends. If you haven’t been, I heavily recommend that you do visit the country, its beautiful, the people are great and I love how raw and natural it feels. I would liken that capital city of San Jose to Nairobi, Kenya.

Now during my visit there, I happened to visit a great city called Monteverde, known for its amazing cloud forest. I would post up pictures but unfortunately I (rightfully) assumed that my sisters would take pictures on this trip and (wrongfully) assumed that I would get a copy of these pictures. However, an interesting phenomenon that occurred during my trip in Costa Rica was the way we bartered with various Taxi drivers. There were two events that really caught my attention:

1. My sisters and I were in the main town of Monteverde and we happened to need a ride to Playa Samara (a less touristy alternative to Manuel Antonio, and just the vibe you get from being there makes you scream “pura vida”). Now in this town, there were essentially 2 SUV taxis (Toyota Prado’s I think) that we were looking to take into Playa Samara. We approached one of the drivers to negotiate a good deal for the next day, but the man wouldn’t bargain. He was fixated on one price and was one hell of a negotiator. My sister walked away from him without a finalized deal, and I though I’d go talk to the other taxi driver instead. I walked up to the other taxi guy and noticed that he was asleep in his car, so as I walked back an began reporting to my sister what I had just seen, the initial taxi driver came to us spitting some Spanish phrases as fast as he could. Not that I could understand him too well, but I could tell he looked worried. He came up to us and announced a better price than before. And this is the price he charged us the next day when we left the beautiful city of Monteverde.

Now the interesting thing in this story is that all we as consumers had to do was assert our market power and show the taxi driver he didn’t have a monopoly. He must have seen me approach the other driver and probably thought that I was going to tell my sister the other driver had offered us a better price. It makes you think how often consumers can get ripped off for not asserting such market power. And it also makes you think how often we could have negotiated better prices by letting our suppliers know we were considering purchasing from others.

2. So later on that night I thought we would assert the same market power. I was planning on showing up the driver that would take us back to our hotel from a day of white-water rafting (heavily recommended by the way, one of the most exciting things I have ever done). Unfortunately that night in Monteverde there were no other taxi drivers so I couldn’t play the same trick as before, but not to worry, the taxi driver only needed to ‘think’ that we had other options. So we sat down in his taxi (a much smaller sedan this time) and told the taxi driver and asked him the price. He obviously overstated the price and like all intelligent customers we refuted his quote and told him that we had taken a taxi for much less that day and that we could just call up the same cab driver and he could take us to our hotel for the same price he did earlier. Much to my surprise, this was no ordinary taxi. He had a radio communication system built in and so he dialed in another fellow taxi driver from his car and asked her what the going rate for a cab ride from the city to the hotel was. Right there in front of us he had shown us this oligopoly agreement that all the taxi drivers had made, he told us there was a fixed price and all the taxi drivers in the city wouldn’t take us for less at this time of night. I’m guessing the guy who took us earlier wasn’t from the town and so hadn’t been in on the agreement, but I was not going to mess with this driver and get thrown out of his cab. I graciously accepted his price and we made our way to the hotel. The man had just demonstrated his superior economic power.

Moral of this story, assert your market power whenever you can. You’ll end up getting the best deal you can, and the market will be as efficient as it can, no unnecessary surpluses for anyone.

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About alalani
I grew up in Tanzania and now I'm a student at Stanford!

One Response to The Economic Power of Costa Rican Taxi Drivers

  1. Fatima says:

    nice! saw a link on facebook, it was on the newfeed, i am not a stalker.

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