Brothels, Buffets, and Disneyland

I read in a local newspaper about a bordello in Germany, where prostitution is legal, that charges customers a fixed fee: a bit over 100 euros ($140) for an evening of drinks, food, and entertainment.

This kind of pricing is common to amusement parks (Disneyland, for example), ski lifts, all-you-can-eat restaurants, and elsewhere. It is a way the firm can minimize the transactions costs of pricing each service and also, if the fixed price is set properly, extract the entire consumer surplus.

With such a pricing scheme, however, the customers who choose to pay the fixed fee will differ from those who buy the product if each item is priced separately. Visitors to Disneyland will disproportionately be those who will consume a lot of rides, skiers will be those who want to make a lot of runs, and bigger eaters will visit all-you-can-eat restaurants (for example, I never go to them because they’re a bad deal for me).

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  1. Paul says:

    So this bordello should attract those who consume a lot of sex? That doesn’t bode well for the prostitutes.

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  2. hmmm... says:

    Thus logically the ones who would want to use a fixed price brothel are the ones who would want to do lots of stuff that might be supplemental charges elsewhere.

    The mind reels….

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  3. Phil says:

    Well it seems to be a TV invention that brothels are always headed by wise madams and not slave traders. But to be fair the pricing scheme generated a lot of attention in the media, so this may be a really low cost advertising, depending on how long they run with it.

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  4. Morten says:

    I wonder how a fixed prize can ‘extract the entire consumer surplus’? This does not make any sense to me. Do you mean the entire consumer surplus of the marginal consumer? As you suggest, a skier making lots of runs surely gets to keep some surplus, as the resort have to price low enough to attract less keen skiers etc. Would be great if you could elaborate what you mean.

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  5. William says:

    Look what happened to six flags. Ch 11 bankrupcy. Doesn’t always work out.

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  6. TSG says:

    I’m not sure the ski resort analogy works.

    Does anyone know of a ski resort that allows you to pay for one trip up the mountain? Lift tickets are more typically sold in full or half day increments aren’t they? It seems to me that for most skiers, what they are paying for a lift ticket seems to have little impact on whether they maximize the number of runs in a day.

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  7. Grant says:

    At Disneyland you pay for admission and then pay more for food and drink. Not an entirely apt comparison.

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  8. M.B. says:

    The comparisons would seem to have less in the way of product differentiation or differences in consumer perception of quality. This has been re-phrased with no attempt at humor so that the editors will let it through this time.

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