I have a friend who runs a software consultancy and clients often try to negotiate the price down when they find out their geographical location. His response is that he can’t do that, because if he does, then he’ll have to pay his employees/consultants less and since they work in a global economy they’ll just end up leaving his business and they’ll go to a competitor who will pay them the market rates. That way the client will end up getting an inferior product that will take longer to develop. His main reasoning is that by negotiating on price, you’re negotiating on quality. His business is doing well and has been around 10+ years.