West vs. East : Cultural, Financial and Behavioural Approaches

Note : Thanks to Uday Kadle for posting the above post on FB and triggering of this long train of thought into a comment and eventually a blog-post.

What would you choose from the below choices ? : 

In 'Barista' we'll put in a tip for the English speaking waiter for a coffee "worth" hundreds. We'll pay Rs. 30 for a small cup of "American" Sweet Corn as the server wears plastic gloves and a red uniform. Is McDonald's burger any better than local bakery? Not at all!!

This is just Behavioural Economics!!

I WAS thinking about this strange behaviour for a long time and I think I've got a few ideas why this happens.

1) Overheads :
The bakery/Mall goes to lots of pains to put in ACs, Soft Lighting, Escalators, English speaking employees with plastic serving caps/gloves and a Manager with a polished English accent in leased upmarket High-Class areas.The owner expects a premium return on investment doesn't he?!!

2) Perceived value-addition : Advertising selling soaps and chips makes them worth more by associating Film Stars with their products. The local chips maker doesn't do this and reduces his costs. Coke is just coloured fizzy sugar water. Difference is packaging and perception creating overheads. Comparatively the Thela seller might not even own the Thela he peddles around. Low overheads and good profits.

So it's OK, right?  
What matters is the Profit Margin for the seller.
Both Premium and Retail middleman are surviving.

As for the farmer the retail price and wholesale price are quite unrelated in ANY field. Recently I got sold an electrical tool for MRP of Rs 150 which I found out was available to the electrician at a special price of Rs. 80. This was just a 15 meter spring made out of metal worth maybe Rs. 20?!!

Each person takes his cut and lives. The end-user is many times unaware of the extent of these behind-the-scenes commissions.Forming a co-operative like Amul might be a better idea to take over the market themselves than to stay poor and isolated by choice. 

Verghese Kurien talks about this process of getting organised in his book "I Too Had A Dream" :

Shyam Benegal's movie Manthan title song : https://www.youtube.com/watch?v=Borj8EIkNRk

Manthan 1976 Hindi Film : https://www.youtube.com/watch?v=VxRaMeDWWu4

Manthan 1976 clip of Naseeruddin Shah and Amrish Puri about an argument between an Amul farmer and a Milk Middleman : https://www.youtube.com/watch?v=qup5i3LnrGQ


3) Optimization : We optimize for the common case i.e. we buy potatoes everyday and understand that we have to economize somewhere.

4) Culture :
In fact by making the context as Western and Alien as possible the (not so) simple middle-class person is overawed by the Halo. We act differently in different contexts. So even though Lays is manufactured locally we pay American prices for a perceived American product. In fact we wonder how it is cheaper than most US products. In Indian context we are bound to bargain and follow the cultural cue automatically.

Sheena Iyengar talks about "How we make choices" with relation to Cultures : https://www.youtube.com/watch?v=h3Tp_nscwjM

Sheena Iyengar The Art of Choosing : https://www.youtube.com/watch?v=IufplIxnW-E

Sheena Iyengar : How to make Choosing Easier : https://www.youtube.com/watch?v=1pq5jnM1C-A