FREAK Shots: $1 Billion Dinners and Other African Pricing Problems

Fares for a trip to Goree Island in Senegal (the Communaute Financiere Africaine franc, CFA, is the Senegalese currency) break down like this:

Foreigners:

Adults- CFA 5,000 (US $13)
Children- CFA 2,500 (US $6)

Africans:

Adults- CFA 2,500 (US $6)
Children- CFA 1,500 (US $3.60)

Senegalese:

Adults- CFA 1,500 (US $3.60)
Children- CFA 500 (US $1.20)

PricingJohannes Kiess

In this skewed pricing scheme, non-Senegalese Africans pay the most for their children relative to their own ticket.

Freakonomics reader Johannes Kiess asks:

Does the pricing mean that Africans who travel with their children must be relatively rich compared to locals and non-Africans and therefore can pay relatively more for their tickets than Africans without children?

It may seem like that’s the case when you look at what some Africans pay for their dinners:

Freakonomics reader Justin Dombrow sent in this receipt from a dinner his South African friend had at the Victoria Falls Hotel in Zimbabwe.

Inflation

But Dombrow’s friend doesn’t have to be rich to pay one and a quarter billion Zimbabwe dollars (ZWD) for two beers, a mineral water, and one dinner.

Thanks to inflation, it comes out to just $2.70 in U.S. dollars (according to OANDA.com).

Zimbabwe’s severe inflation sparked a parody of the Million Dollar HomepageThe Million Zimbabwean Dollar Homepage (worth US $0.002159).

(Send your FREAK-worthy photos here.)


Sahil

Regarding the Senagelese question, it's perhaps just out of simplicity of not stocking change for 250 F. Africans like things simple :)

frankenduf

I love how the 'mineral' water is xactly one tenth of the dinner price- even at $95 million, bottled water is a ripoff

JD

The receipt is dated March 23rd. At that time the black market exchange rate was 70 Million to 1 according to Wikipedia. So the dinner cost was $17.75. Today the black market rate is closer to 1 Billion to one.

Will

Considering the state of Zimbabwe's civil infrastructure, $95 million for bottled water is probably worth it, as the tap water could make you very sick.

Lee

But do you think it is right to ask foreigners more? Like I am in Mumbai at the moment for work and in a lot of places it is 30 rupee for indian adult and 250 rupee for foreign adult (0.5 EUR compared with 4 EUR, 8 times more).

True, we have a higher income, but somehow it doesn't feel ok to me. Why do I need to pay 8 times more to see exactly the same? I already pay tourist tax, I already buy all the local souvenirs and crafts for which i am overcharged, etc.

Eric H.

What I want to know is how much the prices of the menu items changed from when Mr. Dombrow's friend looked at the menu and ordered his food and when he paid for them. Or does the restaurant guarantee your price at the time of ordering.

More interesting would actually be how the menu looks. I imagine that the restaurant is at least somewhat fancy so a large whiteboard with constantly changing prices may not be acceptable. Do they re-print the menu 2 or 3 times per day so that it reflects current prices?

Roland

Well, I am fine with price discrimination!
There are usually two groups of customers foreigners and locals. They on balance differ massively by what they are willing to pay for... say a boat trip. And while discrimination is not perfect (rich locals, long-term backpackers ;), in general it should work just fine. The alternative leaves either the locals paying an inflated price (in my eyes worst) or the tourists make a huge bargain (being one - not so bad, of course, but not optimal)...
Of course you feel ripped off when paying X-times the local price but I think it's fair enough if the income differential is high... and practically, well, you pay it in the end, don't you? So...

Adam

I saw photos from my friend's recent trip to Zimbabwe. The stacks of rubber banded million dollar bills required to pay for dinner there are really astonishing.

Roland

Hilarious... in Zimbabwe I am a billionaire...

Well, I think the pricing scheme shouldn't be overanalysed. I bet that there is huge bias due to existence - and convenience of use - of actual denominations of the currency... ?

Scott

I would guess that the menu lists prices in "Units", and then the conversion rate for 1 unit = however many ZimDollars is posted (and constantly updated) at the front of the restaurant where you pay the bill. I saw this at the Novotel Hotel at Moscow's Sheremetyevo Airport... even though the Ruble is a stable currency now.

So then the water as listed in the menu costs 1 unit, a beer 2 units, and dinner 10 units. They post the conversion of 1 unit = Z$956,350,000 at the register and enter the factor in when they bill you.

luke

a little off topic, but for the longest time, there was this convenient store nearby advertizing bud lite:

6 packs: $3.49
18 pacs: $10.99

as i see it, if someone is foolish enough to buy the 18 pack, they earned the extra $0.52 price tag.

Ian

Did anyone notice that all the prices are a factor of 500? Half of 2500 is 1250 but I would bet that anything (coins?) under 500 are rare. So I would guess one number was rounded up and one rounded down.

I was in Turkey this past February. They recently dropped SIX (6) zeros from their currency! They don't have 1 kuruÅŸ coins (1/100 Lira) that I saw, so their smallest unit of currency is 5/100 Lira. This used to be 50,000 Lira.

This is some serious depreciation:

1966 - 1 U.S. dollar = 9 lira
1980 - 1 U.S. dollar = 90 lira
1988 - 1 U.S. dollar = 1,300 lira
1995 - 1 U.S. dollar = 45,000 lira
1996 - 1 U.S. dollar = 107,000 lira
2001 - 1 U.S. dollar = 1,650,000 lira
2004 - 1 U.S. dollar = 1,350,000 lira
2007 - 1 U.S. dollar = 1,260,000 (old) lira = 1.26 new lira
2008 - 1 U.S. dollar = 1,200,000 (old) lira = 1.20 new lira

M Todd

I have a 1 million lira note from Turkey. Anyone can be a millionaire, all you have to do is move to the third world.

Molson

>

McDonalds in Manhattan is the same way with their chicken mcnuggets. It's $2.99 for a 10-pack, but only $1 for a 4-pack.

Dan

Ryan, the typical pricing scheme is to give a discount for larger quantities. This helps move inventory faster and provides a more stable revenue stream, which is usually more desirable for a business than getting more rare sales of higher profit items.

Ryan

Luke. To me it's worth the extra $0.52 to only have to carry 1 case home, not 3.

Danielle

this is awesome

Sadza

Well apparently there is no more forex black market rate in Zimbabwe the exchange rate was floated its operating on a willing buyer willing seller basis . Todays rate to the US dollar is

us$1:5 000 000 000

Offcourse everyone here has become a billionaire !!!

WarEagle

Russia used to charge foreigners more for plane and train tickets in the early to mid-90s. Then they were successfully sued and the prices were equalized.

And Russia dropped 3 zeros from their currency in 1997. A 1,000 Ruble note became 1 Ruble. Pre-1997 coins became meaningless. Kopecks had largely disappeared by this time. Then when Russia defaulted on portions of their loans in August 1998 the value of the Ruble fell by almost half over night and eventually slipped to 1/4 it's earlier rate by the end of the year.

We are on our way to the same kind of inflation if the federal government continues to spend at the present rate. It won't matter if Democrats or Republicans destroy the currency.