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paying for cabs

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legal warning: The information here should not be understood legally as financial advice. If you believe anything on this site is in error, please contact me. I am always open to corrections, new ideas, and new opinions...

There are two ways to determine how to pay a cab driver in Israel:

(1) You can pay according to the meter.  This means that you pay according to how much time you spend in the cab.  Alternatively, you can…

(2) Set a price in advance and go according to that price no matter how long the ride takes.  There is an urban legend that this is illegal because it allows the driver to pocket the money.  This is not true.  As long as you request a receipt, the ride is registered and the driver will not be able to pocket the money.

So which option is best?

As first glance, one might say that the meter is best.  After all, if the ride takes longer you pay a bit more, but if the ride is shorter, you save money.

But once you take behavior into account this is no longer true.  Once the burden of time is borne by the consumer, it becomes in the driver’s best interest to take his time.  Suddenly, it’s okay to stay behind a slow car on the highway.  It isn’t so important to catch that yellow light anymore.  A few dishonest drivers may even take a “short cut” for extra time or knowingly drive into a traffic jam.

This is why I always agree to set a price in advance.  Once I set a price, I make it in the driver’s best interest to get me to my destination as soon as possible (usually alive, although sometimes you have to specify this.)

Technically, cab drivers have a guide that tells them how much they are supposed to charge, based on your location and destination.  Practically, they never stick to it.  The same way that the member states of OPEC (Order of nations who Pathetically use Extortion because they Can’t beat Israel) often sell oil on the side for a marginal profit while undermining the cartel they are trying to build, cab drivers will negotiate on the margin, even though it means lesser fairs for everyone in the end.  It’s nice to know we have something in common after all.

Getting back to our subject.  Practically, how do I set a price?  Well, if I have an idea of what I should pay, I offer it to the driver.  If not, I offer the driver some ridiculously low price and see if he takes it.  Sometimes he says yes, but more often than not he will tell me a higher price.  I will always try to drop his first asking price by ~ ₪ 10.  If the driver does not agree, I stop a different cab.  This time I offer the cab driver a bit above my initial offer for the last driver, but will eventually settle on the final price I gave the last one.  If this driver does not agree, then I will take the next cab that will agree to anything less than the cheapest price offered to me by the first two drivers.

This system is based on a common application of game theory.  The game is for me to get a cheap ride and for him to get me as a customer and then get the most money out of me.

So in order for me to set the terms of the game I should :

(1) control the game by making the opening offer (“Can you take me to Petah Tikvah for ₪ 50?)

(2) learn the market price, which is why I never let a cab leave me without making a final counter offer (“okay, the how much will you take me to Petah Tikvah for?  That much?!  What am I, a friar?.”)

(3) negotiate marginally (“what about ₪ 10 less?  Is ₪ 10 so much that you don’t want my business?”)

(4) never let the cab driver’s comments affect me (“I’ll have you know, my mother is a saint!”).

In short, by using game theory one learns the market price and then looks for the best price by thinking marginally.

Do you usually go by the meter or negotiate a price?

PS – if you have elderly people in the cab, it is in your best interest to go by the meter to make sure that the elderly people do not get hurt due to crazy driving.


11 Comments

  1. […] in the Inter­na­tional M.B.A. pro­gram at Bar-Ilan Uni­ver­sity, has an excel­lent post on nego­ti­at­ing cab fares in Israel for any­one inter­ested in game the­ory, the art of nego­ti­a­tion, or the real­ity of daily […]

  2. M says:

    I really enjoyed this!

  3. LeahGG says:

    If you’ve ever looked at a cabbie’s meter guide in NYC, being stuck behind a slow moving car doesn’t give the cabbie extra money. Cabs get paid for distance traveled with extra for time they sit waiting. Driving slow is a disadvantage for them no matter what.

    I always choose the meter. If the guy seems pissy about using it, I switch cabs.

  4. ruthie levi says:

    as a frequent cab rider in jerusalem, your post/attitude towards another working class person is rather revolting. & if u purport to be a religious person, i m speechless as to this sort of behavior. in 5 years of continuous ridership, maybe i have been “ripped off” 5x total. does that justify an attitude such as yours to the entire cab driving populace? doubt it. viewing the service provider(the driver) as the enemy will in no way garner you better service.

    • jonnydegani says:

      I do not see anyone with whom I do business as an enemy in any way. One of the things I like most about of Israel is embracing the game of negotiation (mostly unknown to most westerners). We are all equals in every way and we are all playing the game. I negotiate with people in shuk all the time. This does not mean that, God forbid, the salesman and I are enemies.

    • Genius says:

      Ruthie, could you explain how the behavior he described is irreligious? It doesn’t seem that way to me.

      I’ve found the taxi drivers in Israel to be some of the worst people with whom I’ve needed to deal in all the years I’ve lived here. I end up arguing with the driver over something at least half the time I get into a taxi, and that has increased as I’ve learned more Hebrew (and learned more of their tricks).

      I can’t count the number of times I’ve gotten in a taxi, told the driver the address, he starts driving and then halfway there he tells me he has no idea where he’s going (silly me, I expected someone driving a taxi in a certain city to know that city’s streets). I can’t count the number of times a driver takes me most of the way to my destination, and then he realizes he might not be able to get another fare there, so he stops the ride and just demands the full amount. I can’t count the number of times I’ve been in a taxi whose driver stopped to pick up a second passenger without my permission, or whose driver stopped to run into AM/PM, or whose driver stopped to say hi to someone he knows passing by on the street or sidewalk. Recently I was with my parents in Jerusalem and took a taxi with them from Ir David to their hotel, and the taxi driver tried to rip them off by taking them to a totally different hotel and then leaving the meter running while he figured out his “mistake” and took them to the correct hotel. He thought we were a family of tourists, but he didn’t realize that I speak Hebrew and I told him he’d get ZERO SHEKELS from us unless he took us to the correct location immediately (and I had no problem letting him call the police…).

      I’ve never heard of anything like any of the above incidents happening in a civilized country, but they’re downright expected to happen here. Israeli taxi drivers are vultures.

  5. LeahGG says:

    Ruthie – I’ve been treated badly much more than that, though much of my travel in taxis of late has been in Haifa.

    The majority of drivers are honest and don’t make trouble. If you get one who is annoyed at having to use the meter, get out and take a different taxi. He will likely take you the long way around.

    btw, in my recent trips to haifa with a baby, I found that when I traveled with my dad & mom, I got cheated 2/2 times. When I’m with my mom, it’s about 1/4. Alone, almost never. How often you get cheated seems to have a lot to do with how the drivers perceive you.

  6. Genius says:

    I’m very amused that you and I have almost exactly the same method for choosing a taxi.

    The only difference is that I calculate in advance the premium I’m willing to pay to have a Jewish driver, considering the neighborhoods of origin and destination, the time of day and week, etc. In Jerusalem the Jewish driver premium is typically NIS 5-10 (ie, I’ll pay that much more to be driven by a Jew.

  7. ruthie levi says:

    perhaps consider it is maybe the attitude u present to the driver when entering the cab. how can my daily taxi experience vary so greatly from yours? what is the difference between our approaches? i hail a cab & get in…in your world, a whole lot of mental energy goes into the process. & i do not have an adversarial approach to the entire taxi driver profession.

    • Genius says:

      Do you mean to say that none of the things I listed above have happened to you in Israeli taxis? Somehow you’re immune to the taxi drivers here not knowing their way around, capriciously deciding when they’ve done enough work, stopping for their friends or to whistle at an attractive woman passing by? Tell me if these things magically don’t happen when you’re in the taxi, because I know they happen to lots of other people.

      My attitude is that a taxi driver presents himself as a professional. It’s his job to take any and all paying customers, not to stop for random and irrelevant reasons, to complete the ride to the exact destination agreed upon…

      Imagine if I decided one day that I could show up to my job late and leave early, accept only the assignments from my boss that I felt like doing at that particular moment, take out my cell phone and start calling my friends whenever it suited me, and present false time sheets so as to get paid for work that I hadn’t really done. Do you really think I’d last longer than a day? All I ask is that a taxi driver does his job like any professional does any job.

  8. ruthie levi says:

    since u r unable to believe me, i can see how that attitude must play out when u step into a cab unfortunately. again, the sort of behavior u describe does not happen to me routinely….really. & i take cabs almost everyday…again…really! shabbat shalom!

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