Two-Tier Pricing

Two-tier pricing is something that I have been thinking about lately. For those of you who haven’t experienced it firsthand, it essentially means that locals and ex-pats/tourists are charged different prices for the same items and services (with the ex-pat inevitably paying more). In my (limited) experience, it isn’t uncommon in the developing world. At times, it is subtle: the price you pay on an item in the market largely depends on your bargaining skills. Someone else may get a better price, but it is unlikely that you will immediately notice this. At other times, it is blatant, such as when tourist attractions charge tourists far more than locals, or tourists are given restaurant menus with higher prices for the same items.

I have heard friends here complain that two-tier pricing “isn’t fair.” I used to agree with them. When I first started travelling as a teenager, it enraged me that I had to pay more than the locals, particularly as I didn’t see myself as wealthy. Recently, though, I’ve started to wonder if it’s my definition of “fair” that is problematic. How fair is it that wealthy (largely) Western tourists and ex-pats descend on a developing country and, in spite of their considerably greater purchasing power, expect to pay the same price as locals? I suppose it is fair if you base your definition of fairness on the cash value of a good. If, however, you base fairness on what each customer can afford, you get a very different definition. Todd likes to remind me that people will be charged what they are willing to pay – or, in more technical terms, what the market will bear.

Two-tier pricing can get complicated, particularly in a country like Thailand, where there are a variety of different socio-economic levels, both among ex-pats and locals. There is a massive gap between the purchasing power of a rural Thai labourer, and a Thai businessman in Bangkok’s financial district. At the same time, there is an equally large gap between the socio-economic status of a Western teacher working in a local (Thai) school, and an ex-pat engineer receiving a “hardship” allowance. It probably isn’t fair that locals are categorized one way, and foreigners another, when there are so many different economic levels in each group.

I guess what I am getting at is that there is no perfect system, and certainly no fool-proof way of calculating “fair” prices. The two-tier system is perhaps as fair as any other system. Perhaps this really comes down to the debate between socialism and capitalism. The side of the political fence that you fall on likely influences your definition of fair.

Thoughts? Am I way off base?

10 thoughts on “Two-Tier Pricing

  1. A man who used to live in my building would rant about two-tier pricing constantly. He was driven out of Thailand because he was so obsessed with the injustice of having to pay more for his motorcycle ride than a local. There is another dimension to the pricing categories: Expats who speak Thai tend to get a far better price than “Touristy” expats who cannot speak Thai. I like to think of the two-tiered pricing system in Thailand as a “failure to assimilate” tax. If you are just passing through Thailand as a tourist, or if you are an expat who has been living in Thailand for three years but can only say “Sawasdee” then you pay the “failure to assimilate” tax.

    • Interesting point, Heather. I kinda like the idea of a “failure to assimilate tax” – perhaps it’s the “fairest” option of all. And a lot less grandiose than my ramblings about socialism and capitalism 🙂

  2. Insightful comment by Heather. And we all want to get as much as possible for as little expenditure as possible, whether or not it is fair in the big picture. (Is this just a “Westerners” tendency?) On track, Ruth. It does start connecting to political systems, at least in their theories.

  3. oh that is good Heather (nice to meet you, my name is Sarah and I like ginger beef)
    I also found that people would be way cooler with bargaining when you knew some of the local lingue, but a big thing that I found was mentioning I was a student and a volunteer made people drop the price and I would always get sympathy from 3rd party observers.
    that doesn’t help you much Ruthie, just smile and say you have to pay for braces!

  4. When we were in Thailand on our honeymoon we stayed at a place that offered Spa services. The girl didn’t speak much English and her prices for a massage, pedicure etc. were unbelievably cheap compared to western prices. I thought under $10 for a Thai massage was pretty reasonable but there was a male American tourist there who was negotiating multiple services with her. He was trying to get the cheapest price possible out of her and was upset she wouldn’t give him a better deal. I couldn’t believe he was being so cheap! I even mentioned to him that it was a great price compared to what I would pay in Canada. He just walked away grumbling.

    • It’s crazy, isn’t it? I mean, I think bargaining is a good idea, and generally expected, but some farangs take it way too far, and turn the whole thing into a personal vendetta or something.

      On another note, where was that awesome kayaking/jungle place that you guys went to? I want to check it out 🙂

  5. There are some fair comments about two tier and Heather is right about speaking the language. I’m only a tourist but because I like to explore and I speak the language I find I do get treated differently to when I first visited Thailand. But two tier pricing is about fairness, it is about developing the Nation, it is about being fair to the natives. National parks for example are built using Thai tax payers money – why should visitors benefit from these impoverished people?
    A tourist earns 4 times as much as any Thai peer – wouldn’t it be reasonable to charge them 4 times as much. And that is what most National parks do.
    I agree that it’s a bit of a cheek when entrepreneurs try to adopt the same practice but like Heather says – its a “failure to assimilate tax”
    The system is fair – the farang are not!

    ps: like your website – I thought I was the only facetious farang?

    • I think you make a good point, Rich – if parks are built using Thai taxpayers’ money, it makes sense that they should pay less than foreigners. What bugs me is that as an expat, I also pay Thai taxes, which makes the higher rate seem a little unfair. I’m also not convinced that I earn four times as a much as my Thai peers!

      I agree with you about Heather’s “failure to assimilate tax” – that seems fair.

      ps: nope! There are more of us out there!

      • LOL – ok you got me Ruth
        I meant peers working in the west on average are paid four times as much..

        Do you show your Yellow Card and ask for the Thai rate in places like national parks?

        • Haha. Ok, point taken! What is this Yellow Card you mention? I show a copy of my work permit when I go to national parks etc. – sometimes it works, sometimes not (although the times that it hasn’t, the officials have been generally unpleasant, so maybe it is a personal rather than policy thing).

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