I’ve always found bargaining to be interesting from both a behavioral economics and a cultural perspective. Chris Blattman had a great post on bargaining fractions a couple years back, specifically focusing on taxi fares. To summarize, in many countries there’s no taxi meter, and it’s appropriate (and often necessary) to negotiate a rate. Chris has found that the final negotiated price in a given country is usually a pretty consistent fraction of the driver’s initial offer price (assuming you’re a decent negotiator). But what’s interesting is that this fraction varies significantly between countries. Chris then talks about a few negotiation strategies that will help a traveler get down to a given country’s fraction without paying too much of a “foreigner premium.” I won’t repeat them, it’s worth a read if you’re interested.
Based on my experiences in Cambodia, I’ve got one strategy to add. In Phnom Penh the most common way to get around is by tuk tuk, which is a carriage pulled by a motor bike. The drivers are generally very friendly and helpful, but this won’t stop them from taking advantage of someone who’s too nice (or ignorant). I’ve found that when I ask a driver how much for a ride to my destination across town, they usually start at $4-$5 depending on the distance, and then after a couple rounds of negotiation (which can include pretending to walk away), I can usually get the price down to $2-$2.50, never lower. So I would say Cambodia’s bargaining fraction is about .5.
What’s interesting is that when I start out by offering to pay $1, the driver will usually counter with $3, and I can almost always get the price down to $1.50 (if I care to put in the effort). Again, 50% of the driver’s first price, but the diver starts lower since I framed the negotiation around $1. While it doesn’t sound like a lot to be bargaining for, this is the only way to get around town, and it can add up with 5-6 rides a day over a couple weeks. And this price is definitely still much higher than what the locals pay.
So, at least here, if you know the approximate fair value of what you’re bargaining for, I’d say always throw in the first offer to get the best price.
Then again, the cheapest, fastest, and most fun way to get around here is to flag down a motor bike driver, and then jump on the back. A ride just about anywhere in town will be $0.50-$1. My favorite experience was when I waved down a moto driver to ask him how much for a ride, and his response was, “Eh, whatever you want! Hop on!” He got $3.