The Great Gefilte Fish Shortage

Fresh-made gefilte fish is hard to find this Passover season, because the harsh winter restricted fishing on the Great Lakes, sharply decreasing the supply of an essential input—whitefish. While this delicacy is not required by ritual, it is traditional—and with fresh-ground horseradish it is a mouth- (and eye-) watering treat.  One would think that a rising price would equilibrate the market, but it hasn’t—apparently merchants did not want to antagonize customers by raising prices.  Indeed, the nature-induced shortage in the market for fresh gefilte fish has increased the demand in the related market for the pre-made Manischewitz product, so that is hard to find too.  Pretty sad when you can’t find gefilte fish even in Manhattan!

Pricing at the British Library

At the British Library, the special exhibition about Georgian England has a concession (old folks) price of ₤7, but also a listed concession (gift) price of ₤8. With the latter, one gets a receipt and can deduct the ₤8 from one’s income at tax time. If one is in the 20 percent bracket (taxable income from almost nothing up to ₤32,000), the net admission price is ₤6.40. So the incidence of the subsidy is typically shared nicely by the library and the taxpayer. But for the highest-income visitors — tax rate of 40 percent — the overwhelming share of the benefit goes to the taxpayer. I’ve never seen this double-pricing scheme made so explicit — and the sharing of the gains made so clear — in the U.S.

College Campus Beer Pricing

There are three convenience stores in the student area west of the University of Texas campus.  Store A sells the most beer, and barely looks at student IDs; but it also charges the highest price of the three.  Store B is a bit stricter on fake IDs, refuses some underage students, and charges a lower price.  Store C has the best prices, but its clerks inspect IDs thoroughly. My student reports that nobody makes it through with a fake ID.  This near-campus oligopoly defines a new pricing strategy: lenience on IDs that is unsurprisingly related to the stores’ pricing policies. I wonder about differences in the characteristics of the patrons of the different stores.

(HT: JZ)

Cheaper Plumbing on Fridays

We received a postcard from our plumber offering service on Fridays with no service charge, explaining that they can offer this because the plumber will be in our area of town, thus saving drive time and fuel costs. We are better off, saving the $59 on the service charge; and the plumbing company acknowledges that the savings make it better off too. It’s not often you see a company that understands Pareto improvements this well. I invite other examples of commercial offers where the advertiser makes the mutual gains as clear as this.

Who Wants a Haircut for $9.99?

The other day I was walking past this barber shop on Broadway in the upper 90's. This sign caught my eye.

It made me wonder what kind of customer is willing to get a crewcut by an "apprentice barber." Would you? Also, was there really an "apprentice barber" on standby only to handle the $9.99 cuts? Not likely. It did make me think back to when I was in grad school and needed a root canal, and took advantage of the cut-rate dentistry available at my school's College of Dental Medicine. The root canal was performed by a student -- it took many visits, was unbelievably painful, and kept me from returning to any dentist for several years.

How Much for a Margarita?

I was at a restaurant the other day which had an interesting feature: the two menus they gave us listed different prices for the same items. One menu quoted $12 per margarita and the other offered the exact same drink for $11.

For a split second I wondered whether the restaurant was carrying out some sort of pricing field experiment. I’m pretty sure, though, that wasn’t the case. Just regular old incompetence, I suspect.

I wouldn’t usually pay $11 or $12 for a margarita, but I was so curious in this circumstance that I went ahead and ordered one. (Well, actually, I ordered three by the time I was done.)

What was the true price? Strangely, it turned out not to be $12, or even $11. They charged me exactly $7.94 per drink.

Luckily, I didn’t know that in advance or I might have had a fourth margarita, which definitely would have been a bad idea.

Paying Less … Without Health Insurance

Writing for the Wall Street Journal, Jeffrey Singer describes a patient who came in for a "simple outpatient surgical procedure" and discovered it was cheaper to just ignore his "low-cost 'indemnity' type of health insurance policy."  The patient's estimated costs had he used his health insurance plan: approximately $20,000 (out of the estimated hospital charge of $23,000).  After speaking to the patient, Singer realized that he wasn't bound by a "preferred provider" contractual arrangement and offered the patient a solution that saved him $17,000:

I explained that just because he had health insurance didn't mean he had to use it in every situation. After all, when people have a minor fender-bender, they often settle it privately rather than file an insurance claim. Because of the nature of this man's policy, he could do the same thing for his medical procedure. However, had I been bound by a preferred-provider contract or by Medicare, I wouldn't have been able to enlighten him....

Most people are unaware that if they don't use insurance, they can negotiate upfront cash prices with hospitals and providers substantially below the "list" price. Doctors are happy to do this. We get paid promptly, without paying office staff to wade through the insurance-payment morass.

So we canceled the surgery and started the scheduling process all over again, this time classifying my patient as a "self-pay" (or uninsured) patient. I quoted him a reasonable upfront cash price, as did the anesthesiologist. We contacted a different hospital and they quoted him a reasonable upfront cash price for the outpatient surgical/nursing services. He underwent his operation the very next day, with a total bill of just a little over $3,000, including doctor and hospital fees. He ended up saving $17,000 by not using insurance.

(HT: Jason Hirschhorn)

Taxi Pricing: Hail or Call?

I called a taxi for a short trip in Melbourne, Australia.  When I paid the price on the meter, the driver added a $2 booking fee.  This is standard here, unlike in the U.S. where the price is the same whether you hail or call a taxi.  

The Australian system may be a sensible way to set price to cover marginal cost.  The booking service generates costs; and in many cases the booked driver “dead-heads” to pick up the passenger, using his valuable time without generating revenue.  On the other hand, having a booked fare saves the driver time waiting in a queue or cruising, so perhaps the impact on marginal cost isn’t so clear.  Is this monopoly pricing, or price reflecting cost?

Age Discrimination? Pay Your Birth-Year Rate

Canadian reader Lisa Sansom wrote to us about an interesting price promotion at Starwood hotels: 

PAY RATES EQUAL TO YOUR BIRTH YEAR 

We're celebrating the year you were born. With this special offer for two or three night stays, you'll receive rates equal to your birth year!

  • First night: full rate
  • Second or third night: rates equal to your birth year! (If you were born in 1948, you'll receive your 2nd and 3rd nights at $48!)
  • Rates for second and third night stays will be confirmed at check-in upon presentation of valid ID.
  • Valid for arrivals Thursday - Saturday

The Economics of Toilet Paper

You never know what kind of useful information will turn up in your in-box. From a reader named Darin Haselhorst:

Steven and Stephen,

Thought this might be right up your alley.  An analysis only a true cheapskate could love.

I get very frustrated trying to compare prices on "paper products" at my local supermarket, Safeway.  They have various marketing terms meant to confuse the average consumer, regular, double, mega etc., making nearly impossible to compare prices on the spot.  So, I threw together a little spreadsheet (attached).

The price as Safeway was not all that surprising until you compare it to the price for which Amazon is willing to deliver it to your front door.  The Amazon Subscribe and Save program is about 30% cheaper than going to the store.  Not too bad.  If you have Amazon deliver 5 items on automatic delivery, they will take an additional 20% off the entire delivery.  A deal any true economist simply cannot pass up.

Its surprising to me that Amazon is willing to deliver to your door for approximately half the price Safeway has on their shelf.