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Tuesday, December 30, 2008

No upside to honesty

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Few things are certain in life: death, taxes, and getting cheated by auto-rickshaw drivers. I've lived in about five cities in India so far, and I haven't found any which has honest auto-rickshaw drivers. Experiences of others suggest that there doesn’t exist any place in India where this is so. While Mumbaikers claim theirs to be the best of the lot and Chennai-ites beg the award for the worst, it's mere matter of degree of dishonesty. By honest I simply mean driver asking me fair money for my trip. In most cases there is regulated metered fare and in other case there is competitive established market price.

My understanding says that fair price cannot evolve into this market because there is no way to build consumer loyalty. Rickshaws are need based services and unless someone takes regular trip from same place to another place frequently, one is not likely to encounter same driver next time. Consequently, they have no incentive to be fair because it will not help them in getting more business. On the other hand, dishonesty has all upside and no downside. They can ask more, which they will get sometime, and worst they will get is fair price, if passenger is knowledgeable. Honest drive will always get fair price but no more. Clearly, it make sense for auto-rickshaw drivers to be dishonest and cheat their passengers.

If we were to counter this then economic incentives will have to be reversed. This can be done with punishment for dishonesty in form of police fine or chalan. This is, however, not practical due to non-response by Indian police on such issue, problem in proving crime, additional efforts and time involved in going through the procedure, and triviality of such crimes against bigger issues which police can devote resource to. If we cannot negatively incentivize dishonest drivers then we can positively incentivize honest drivers. This is what I do, and this will work only if most of the people start doing it.

Often but not always, if I find that driver is asking me more than fair price then I hand him only fair price (only possible for metered fare). If driver is asking me only fair price then I hand him fair price plus a tip, along with the reason of that tip. I think he needs to know that it makes sense to be honest and that people care about it. Or may be I am just over thinking and he is perhaps laughing at me. Of course, passengers need to be educated to know fair price in the first place for this to work. I can't think of any other effective way, can you?
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