Thai economics 101 when demand falls raise prices

Thai economics 101 when demand falls raise prices

Thai air announced that because they lost so many seats this month because of the Red Shirts and the political turmoil they would raise prices on some seats with 47%.

Most people that are educated in economics would scratch their heads and wonder why someone would do that? Thai Air is not even longer the top airline it used to be and even if Singapore Air has, even higher prices they have been selected a better airline many times around lately. Most people would lower the prices to a level that would reflect the market now and call it a promotion leaving space for raises when the demand comes back. They could have a fun package with record low prices and know some of the completion out of the way but instead they choose to scare the last customers away by raising the prices.

However, the problem is not only Thai Air it is hotels, apartments, shops and many other things. If you cannot sell it raise, the price until someone buy something. In addition, most Thai people in general shop by the rule they do not believe in something that is too cheap and rather buy something expensive even if it is the same item.

For example, my friends send a gift to his Thai girlfriend in USA and he used the normal Thai post office. When the package arrived, the Thai girl was upset and did not even thank him for the new iPod. She was not upset about the gift she was upset about the way of sending it. He should have used FedEx or DHL because they cost more not because they are faster but because they cost more. My friend had no idea what to say he was rather stumbled by this pointless waste of money and from then on their relationship went sour.

You can also see it in the property markets that have no real connection to the real value of land. If you could see all the empty offices and apartment in Bangkok or Pattaya, you would be surprised. Many apartment blocks have just a few buyers and the owner rather leaves it empty then lowers the price. Speculators buy many apartments and house and then left empty, if they rent them out it is to stupid foreigners with too much money from a company account. The prices of the houses and apartment are not set for the real value it is set what the builders think someone can pay or what they need now.

A rich Thai contractor in Pattaya has a hobby to build housing complex and when his done he leave them almost empty to build a new one. He does not care about someone renting or buying them and he never checks the market for the right price. The property brookers and how much comisson they want to make set the price in Pattaya.

I encounter these problems many times before in Thailand when you have a good supplier for a few times and you keep coming back to him. When the times get tough, he raises the prices for his valued customers to take back the losses even if the product should be cheaper. My Thai friends say it is better to never keep a supplier but act like a butterfly and fly from supplier to supplier.

If this does not make any sense do not worry you will get used to it, TIT

Thank you to http://twitter.com/GregBewick for the headline idea.