'Mzungu' prices of goods and services

Traders in many marketplaces in Arusha and elsewhere in Tanzania inflate prices of goods and services when they sell to customers who are new to the transactions in the marketplaces. The inflated prices are called 'Mzungu' prices in Arusha. Mzungu means White man in Swahili.

Mzungu prices are reflected in the open local markets at the Central and Kilombero markets among other places. There are jobless individuals at the markets who expect to benefit from customers by inflating prices when customers buy goods. The jobless people act as middle-men in such situations.

In addition, Mzungu prices are reflected at Moshi town where some lodges charge accommodation in US Dollars instead of Tanzania Shillings. Such reflections are not common in Arusha.

On their part, cashiers at national parks' gates prefer tourists to pay in US Dollars rather than Tanzania Shillings. Some conservation areas required tourists to pay in foreign currency only in the past. That arrangement surprised foreign visitors who did not expect any country to reject its own currency. But it was possible in Tanzania then.

Workers at a local hospital in Arusha convinced a patient to be admitted at the hospital for unnecessarily long time only because Mzungu was paying the hospital bill for the patient. You wonder whether the workers also convince patients to be admitted longer at the hospital if the patients pay hospital bills through medical insurance schemes.

Country bus operators inflate bus fares during holidays. It happens particularly in Dar es Salaam during Xmas and during festive seasons.

There are many reasons for the Mzungu prices in Tanzania. One of the reasons is that the term "Mzungu price" is appropriate for Arusha because many people from outside Africa visit Arusha since the city is a major tourist destination in Tanzania.

Then, there is serious lack of market information for customers in the country. As a result, traders sell goods and services based on situations rather than market forces. In the end, sellers benefit substantially at the expense of customers. It is a situation where sellers appear to 'cheat' customers.

Economists explain that the extensive bargaining at marketplaces in the country is a result of lack of market information. They support the argument by arguing that customers do not bargain when buying sugar or matches because customers in the country know well the market prices of sugar and matches.

Lodge operators charge accommodation in US Dollars because they fetch more than the regular amount of money they charge in Tanzania Shillings. That is the case since US Dollars almost always appreciates against Tanzania Shillings.

Meanwhile, traders inflate prices of goods and services when selling to people from western countries because those people do not bargain where they come from. They buy based on the prices posted on the items.

But inflating prices is just business if you think about it. The traders apply two of the many pricing strategy objectives when they inflate prices. They apply business strategy objectives called maximization of current profits and profit margins.

For example, traders maximize current profits by charging higher prices, at least in the short term, in order to improve overall profit margins. The thing to note is that high prices may result in significantly fewer transactions and lower revenues.

Other pricing strategy objectives include maximization of cash flow and maximization of sales quantity. Traders may charge low prices in order to increase transactions and increase overall revenue and boost cash flows, but possibly at the expense of profitability.

All told, economists acknowledge that most businesses consider determining prices and overall pricing strategies to be one of the major challenges in business.