Why the American Tourist Abroad Is Cheated: A Price-theoretical Analysis

Abstract

Overseas in strange lands, the American traveler is often witlessly duped out of individually piddling, but conglomeratively impressive, sums of money by taxi drivers, porters, postal clerks, and shopkeepers. On a recent visit, my first, to an unidentified southern European country shaped like a boot, a taxi driver convinced me that 100 local currency units for baggage, added to a 200-unit meter charge, totaled 500, which amount I paid. As I gradually realized what had happened, the small loss did not hurt nearly so much as my damaged economist's pride. The rest of my visit was immensely warm and rewarding, but this initial experience continued to occupy my thoughts. Days later, while sitting in the roof garden of my hotel, watching the sunset over Tehran, the powerful framework of modern price theory yielded a satisfactory explanation.' The argument advances quite systematically through two distinct logical steps, both hinging on the rejection of the assumption that perfect knowledge illuminates demand behavior. Introspection will quickly validate the proposition that a consumer who crosses an international boundary immediately loses his monetary bearings. This temporary confusion is the product of two separate psychological conditions, either of which leads to extortionate consequences when the foreign demander confronts a local supplier. The first mental discontinuity we will term the effect; the second will be called the price-warp phenomenon. We will proceed to examine each in turn. Now, the befuddlement effect is itself a product of several factors, the