So much for quantity discounts
I was up with my family at the Wisconsin Dells last week. The water park we were staying at offered hair braiding for children on the following price schedule:
3 braids: $10.
6 braids: $22.
Each additional braid: $4.
This is a very unusual pricing schedule, to say the least. Rarely do you see a product priced so that each additional unit you buy is more expensive than the first ones. There are lots of good reasons for this.
First, the cost to the supplier of providing one more unit to a customer is usually lower. For instance, a big chunk of the total time braiding my daughter Olivia’s hair was in deciding what style of braids to do, getting her seated, etc. The actual braiding was quick.
Second, economists typically think that the marginal benefit consumers get from a product declines the more they have it. In other words, the first braid my daughter gets is more valuable to her than the 99th. Which means pricing with quantity discounts makes sense.
Third, if the same consumer can buy the product more than once, then they can buy 3 braids at a time, effectively getting 6 braids for $20 anyway in the example above.
Fourth, if there is no good reason why the last braids should be more expensive than the first three, then it makes consumers mad that the last three are more expensive.
The hair braiders were unfazed when challenged with these various arguments by my wife (who is not an economist, but has learned to think like one). They said it was fine if my daughter wanted to get 3 braids now and come back later to get the next 3 at the lower price, but they wouldn’t give her 6 braids now for $20.
I unfortunately missed the exchange because I was taking our youngest daughter Sophie to get a temporary tattoo. Inexplicably, out of almost 100 options she settled on a Jim Morrison tattoo. I managed to talk her into a tiger just in time. The tattoo people had a much better handle on pricing: The first color was $5 and each additional color added to the tattoo was only $1 extra.
By the way, my daughter Olivia’s six braids looked great, although hardly a bargain at $22.