Bruce Bueno de Mesquita is the author of The Predictioneer's Game, a book about using game theory to get what you want in day-to-day life. Mesquita argues that we can predict and engineer the future by understanding the self-interest of those involved in making decisions. What does that all mean? Well, over at Big Think, Mesquita has provided a short video explaining how to use these ideas to buy a new car.
Here are the basics of Mesquita's method:
So let me lay out how to buy a car. It's very easy. Decide exactly what car you want to buy, make, color if it matters to you, options and so forth. Then do not go to a dealership. Let your fingers do the walking. Telephone all of the dealers who sell the vehicle you're interested in who are, say, within a 50 mile radius, a 25 mile radius, 75, however far you're willing to go.
To each of them make the same statement: “Hi, my name is so and so. I plan to buy such and such a car today at 5pm. I'm going to buy it from the dealer who gives me the best price. What is your best price?”
This technique will probably sound familiar to some of you. I've mentioned it here at Get Rich Slowly several times before. Five years ago, for instance, I shared this video about how to buy a new car without getting screwed. The idea is the same as Mesquita's.
I've seen this method work first-hand. In 1995, Kris and I used this technique to purchase a new Honda Civic (but we faxed dealerships instead of phoning them). We sent out a letter that looked something like this:
My name is John Roth. I would like to purchase a white Honda Civic with option A, option B, and option C. What is the best price you can offer me on an in-stock Civic that matches this description? I am faxing this letter to every Honda dealer in the Portland/Salem area. This weekend I will purchase the vehicle from the firm that offers the best deal.
Some dealerships refused to participate, but a few responded with competitive pricing. The one we chose offered a smooth, hassle-free transaction. It was awesome! And Kris is still driving that car today, seventeen years later.
[Big Think: How to buy a car using game theory]
Author: J.D. Roth
In 2006, J.D. founded Get Rich Slowly to document his quest to get out of debt. Over time, he learned how to save and how to invest. Today, he's managed to reach early retirement! He wants to help you master your money — and your life. No scams. No gimmicks. Just smart money advice to help you reach your goals.