You don't need to be a hydrologist to recognize the importance of water. All life depends on it. One does not need to be an anthropologist to recognize the importance of cultural differences in food and drink preferences. The Chinese eat dog, the Italians horse, and the French rabbit, among other things. The Russian love their vodka and the Mexicans their tequila. But water: don't we all love water? Yes we do, but what kind of water? Americans take it for granted that they will receive a limitless amount of tap water to go along with the meal. Germans don't. Germans care about their water, but with a difference. Germans adore their Sprudel, most of which comes from certified mineral springs and is heavily fortified with carbonic acid, so much so that the term Rülpswasser (burp water) comes to mind. If you doubt this claim, ask a German friend (or better yet, a stranger) to open the trunk of his or her car. You will find a case of 1-liter bottles of Rülpswasser. Sprudel is not expensive, but it is not cheap either. The rational German mind demands a justification of why Wagnerian quantities of a moderately costly good should be consumed when comparatively inexpensive and wholesome tap water is at hand. It's easy. One can attribute medicinal qualities to Sprudel, pointing to the presence of numerous little-known trace elements, or one can denigrate tap water by raising suspicions about natural or government contamination. Lab tests do not offer much support for these views, though.
What can Americans expect when they ask for tap water in a German eatery? The typical response is not unlike what one would see after ordering a flank steak of horse in Baltimore: a mix of incredulity and resistance. Sure, there is variation. Before giving up and returning to ordering beer, I sampled about 20 experiences with ordering water for my family and me. On a couple of occasions, we were stoically served. On all other occasions, there were raised eyebrows, loud repetitions of the request as if it had been barely audible, attempts to persuade us to order "real" drinking water (i.e., the burping kind), creative ad hoc charges for the precious liquid, and stubborn delivery of Sprudel. We found our toughest opponent in a faux Caribbean place in Marburg. After ordering dinner for four and requesting "Leitungswasser," the waiter explained that he would bring it only with orders of coffee or wine. He'd be happy to supply us with expensive designer mineral water, though. When we insisted on tap, he promised to ask the boss for permission. The boss confirmed the policy, and the waiter explained why. If they provided water anyone could walk in, just sit there and sip free water (as if, and never mind the dinner for four). El Caribe proposed an ultimatum. Either we order the expensive stuff or go thirsty. We countered with an ultimatum of our own. Either you water us, or we leave. We left.
Let us linger on this episode, prop it up with a few reasonable assumptions, and explore its surprising psychology. It is safe to assume, I believe, that drinks yield a higher profit than meals. I also assume that the rate of profit for meals is not negative. Hence, it is better to serve a meal without drinks than to serve no meal at all. I also assume that the cost for Leitungswasser is low. And by the way, customers consume water no matter what. Compared with the gallons of water rushing down the low-flow urinal, the amount of tap water running down the gullet is negligible. El Caribe's ultimatum was a variation of the famous game played by behavioral economists. In the standard game, a proposer has $10 and offers some of it to the responder. If the responder accepts the offer, the money is distributed as proposed. If the responder declines because the offer is low (e.g., $8 vs. $2), no one gets anything. In the water game, the proposer asked for a higher profit and the responder to pay for it. Let's take the purchase of a meal as a starting point. Suppose it is a fair trade, leaving both parties with 10 units pleasure. Adding a profitable but undesired item would add 4 units to the host's account and subtract 1 from the guest's. Why would the guest choose 14/9 (host/guest) over 10/10? (I will return to this question.) The guest's counter ultimatum reverses the ratio. Getting tap water subtracts 1 unit from the host's account and adds 4 to the guests. Hence, the host's choice is between 9/14 and 0/0 (the guests leaves).
Why would the host decline the offer? Is he being completely irrational? Well yes, from a narrow economic point of view. From a broader cultural point of view, he probably thought we would cave in to his original demand. Why? I drew my conclusions after several conversations with patient friends willing to listen to this tale and a good amount of introspection. My first hypothesis is that it hardly ever comes to the ultimatum because Germans love their Sprudel, and for that reason alone would not consider asking for tap water in the first place. More critically, my second hypothesis is that Germans, even if they believe the designer drinks to be overpriced, also believe that restaurants have a right to overcharge them. They really would go bankrupt if they served tap water with the meals. If you believe that, you have to order Evian even if you're not thirsty at all. This is a remarkable feat of persuasion on a grand scale. To buy something you don't need or want because the seller has instilled a sense of obligation in you. It is remarkable because it reverses the effective tactic of throwing in a low-cost item to sweeten the deal. Other food entrepreneurs know this and do well. In Europe, the Greeks serve up an oily yet tasty digestif called Ouzo at no extra charge. They let you know they appreciate your business and that they want you to come back. I will do just that, have my souvlaki and drink my Ouzo too.
Money (added August 2012)
“We are taking a seminar on how to extract lunch money in a cashless society.”
~ Bully on “The Simpsons”
At a time when the Germans are admired and feared for their fiscal responsibility and wealth, I must comment from the ground floor perspective. For a long time, I have been aware of the fact that the Germans have a deep distrust of credit cards. Few places of business accept them. When asked if they do, the response if often gruff and self-righteous, suggesting that the mere mention of a credit card is an affront to their sense of order and respectability. German people and small businesses love cash and the experience of counting it. Businesses do accept the EC card, which looks like a credit card but it is not. You may have it if you have a checking account in Germany, which is a strike against tourists, foreigners, asylum seekers and other xenoi of whom one may be phobic. Over the years, I have come to tolerate, if not to accept, this weird preoccupation in a country that prides itself of its multi-culturalism and whose citizens are the foremost tourists everywhere else in the world [how do they assimilate the fact that they can use American Express – if they have it – in Botswana?]. It has not been easy. A low point was reached when I tried to use my Amex card to buy a commemorative coin at a bank in Wetzlar that had issued the coin. They took umbrage -- and I took flight. From time to time, I still ask if a credit card would be welcome, expecting a Nein! and logging my impression of the body language that comes with it. All the while, I fortify myself with cash reserves lest I get stranded.
This strategy worked well until I arrived in Berlin with a 500 Euro note. I went to the nearest Sparkasse (an average neighborhood bank) and approached the first impeccably suited young man (there were several, standing behind lectern-looking dessk with nothing apparent to do. I described my wish to break a 500 note. He said they do not have a cash counter in that bank, few others still do, and that cash is now almost exclusively dispensed through ATMs. I asked him why 500 notes are still being produced. He said that some large transactions are still being conducted with them. Evidently, there are separate markets for expensive goods and everything else, effectively run with two separate currencies. I asked him if he agreed that this was absurd, but he did not see the irony. Meanwhile, I found a place of business willing to break the 500, but I had to (and wanted to) buy more than chewing gum.
Here's an alternative perspective. Credit card companies charge businesses a lot of money. Nobel economist Joseph Stiglitz notes in his 2012 book The Price of Inequality that prior to 2007 "credit card companies would extract more money from transaction fees than the store would profit from the sale of its goods" (p. 96). One must also consider the possibility that the take of the credit card companies varies across countries. As a counterstrategy I propose the client ask the merchant how must the credit card company will take, and then offer a cash payment that divides the credit card company's profit evenly between merchant and customer. The merchant has no incentive to exaggerate the credit card company's gain because that would reduce his own gain from the split strategy. Likewise, there is only a small and risky incentive to underreport the credit card company's gain because the customer might use his plastic after all, saying that the small cash bonus is not worth it. This makes a negotiation with a merchant an ultimatum game in which the customer holds the trump card.
There is a hitch. Stiglitz writes that “credit card companies impose rules on merchants that accept their cards” (p. 164). One rule forbids surcharges for the use of cards. If there is a difference between the cash price and the card price, it is only a matter of framing to refer to it as a card surcharge or a cash discount. A credit card company that forbids a card surcharge also forbids a cash discount. To recover profits, merchants will pass cost of using a card to the consumer; in the absence of cash discounts, this also raises the cash payment.
Between the Germans and the credit card companies, there are now two hypothesis. One is that the Germans are warier of cards than others, as I originally suggested – or credit card companies charge German merchants more than they charge others. But why would they?
There are some websites that offer an education into the world of credit cards. One is a post on freakonomics.com. On big purchases, credit card companies skim off up to 3%, on smaller purchases, such as a pack of gum, it can approach 50%. I am mildly surprised that Professor Levitt is so surprised that credit card companies make such a bundle on our and the merchants' backs. But then again, he trusts the market. It's ok. Competitive markets can do no wrong. Equilibrium restored. Stiglitz dissents.
Stiglitz, J. (2012). The price of inequality. New York: Norton.