Can I tell you a story of something stupid I once did which nonetheless does not constrain me to always acting stupidly in the future? A particular prospect asked for a quote of my rate. I quoted my then-going rate and then, because I could not stop my fingers, said "But since we're Internet buddies I'll give you a discount." He said "OK, what's the final rate?" And I chopped 50% off. He accepted.

Note that in no point prior to that had he evinced any problems with paying the actual rate and, indeed, the difference between X and 2X is meaningless to him because a) he's a millionaire and b) neither X nor 2X comes out of his pocket, it comes out of a budget of a corporate entity he happens to own a lot of shares in, and both of us assumed (accurately) that the engagement was going to make those shares worth substantially more than X, 2X, or 10X more.

I set fire to five figures with two emails, and he probably doesn't even remember that conversation. Facepalm. But I don't have to facepalm next time, and neither do you.

To be fair I hire a lot of developers on a contract basis. If you were in Vietnam (which is pretty much always off when we're on in SF) I would expect a discount. If I'm paying SF rates I'd rather have you in SF. There's a very real communication and feedback loop in design and dev that is difficult to deal with when folks are on the other side of the world. (Heck I expect a developer in Cleveland to be less expensive then one in SF)

All that being said, and to Patrick's point. One thing I learned running a consultancy was to never assume someone is looking for a less expensive solution. Once we stopped doing this and started charging what we felt we were worth, a lot of our cash flow issues started magically clearing up.

But the going Elance rates are ridiculous. I can make more money here with way less hassle as an English teacher.