price fixing in phuket

Recently I had a chance to visit Phuket, a tourist Island in southern Thailand. Hotels during the off season were priced reasonably, $15 dollars a day for a queen bed and hot shower. But, food and clothing prices seem to be priced significantly higher than the prices one would expect in Bangkok (just a day’s trip north).

The reason, it turns out, is that vendors collude to fix prices. This fact occurred to me fairly early in my trip. Each stall sold roughly the exact same merchandise: mostly Billabong hats, shirts, and shorts. Alternatively, vendors sold make-up accessories and Hello Kitty merchandise. I would bring vendors down to their floor pricing, and walk away, looking for additional price decreases. Vendors seemed very hesitant to go lower. If you mentioned a price another stall was offering, they would demand to know which stall offered those prices.

One vendor, from who I bought shorts, was prevailed upon to sell for cheap ($6). He chased me down as I left and pleaded for me not to tell anyone else the price I paid. I promised not to do so. But I also took the time to ask him about the price fixing, to which he readily admitted.

Recently, the military swept through Phuket to clear the merchants from the beach. One of their other stated goals was to clean up mafia corruption. With price fixing, there is bound to be physical violence to enforce pricing schemes.

So how does price fixing not fall apart? One, the shops limit the variety of items sold. It was maddening how little variety the shops stocked. They were little mirror images of each other. It is easier to price fix if shops limit their merchandise. One hundred items are easier to price track than one thousand.

Two, the shops act as spies and informants on other vendors, listening into the bargaining and also asking customers the prices offered by competitors. The shops are literally open air stalls adjacent to each other.

But with all price fixing schemes, each vendor has incentive to cheat. The pants merchant sold me the pants for less, asking silence in return. Food merchants would regularly allow patrons to bring in outside alcohol. In fact, it was encouraged. Because beer prices were fixed, many bars were deserted and any profit was better than none.

One food merchant strove all over to break the price fixing. When I explained to him we were almost done drinking our current 7-11 purchased beer and would come back once we bought new beers, he thought he would lose us as customers and proceeded to walk us to the nearest convenience store. He bought our beers for us (possibly at reduced prices because he was local) and then he walked us to his restaurant. The beers did not appear on our bill. Although food prices were fixed, he was able to give us a de facto discount through costs that did not appear in their official books. Brilliant!

One of the tragic results of price fixing is overemployment. One of the big industries in Phuket is massages, legitimate and illegitimate. Regardless, massage shops consist of an army of young women (intermixed with transsexual men) sitting around and all calling out to strangers in unison. The sound reminds one of a flock of seagulls “massage, massage, massage”. The prices were double that of Bangkok, and I do not believe I saw even one customer in any shop. These people, while they could have been performing work for less pay, were getting zero pay for the same amount of time. Price fixing left all these workers less well-off than they would be otherwise.

For travelers, Phuket is best to be skipped. It is touristy and uninteresting.

About christopher fisher

The blog is meant for educational/entertainment purposes. All material can be used and reproduced in any length for any purpose as long as I am cited as the source.
This entry was posted in Economics, Price Controls, prices. Bookmark the permalink.

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