Tuesday, June 25, 2013

Waiting in Line So Rich Folks Don't Have To: A Job, or Exploitation?

Craig Newmark cites this example of non-price rationing.

I did chuckle at the description of the "high level analytics" that those young folks were using to figure out how much they were getting paid.

But, some questions:

1.  Is the bakery being smart, or dumb, by making so few tasties?

2.  Given your answer to the above, shouldn't they at least CHARGE MORE, rather than let so much of the rent be dissipated in waiting in line?

3.  But if they did charge more, who would be harmed?  Assume that the price now paid for the tasty by the rich person is fixed.  The rent is simply the difference between the retail price ($5) and the resales price ($50).  So, you get $45 x 2 (2 per customer)  or $90 rent for standing in line.  It seems to be worth about 2 hours of slacker time (they'd just be sleeping, or ironically pretending to be pretending to be pretending to be sleeping).  If the bakery raised the price to $15 each, would people buy fewer?  If the $50 price at resale is fixed, it looks like all that would happen is that the wait times would go down.

Therefore, the socially responsible thing for the bakery to do would be to RAISE PRICES!  Then, the kids would only have to wait in line 95 minutes (say).  They would get $35 x 2 rent for waiting, about the same hourly rate.  But there would be less deadweight loss.

Those bastards!  They won't do the socially responsible thing and raise their prices!

1 comment:

  1. Perhaps the bakery is actually saving money by not raising prices. There is a significant value to having a long line stretching down the block. Think about night clubs and movies, and the buzz generated by long lines to get in. How much advertising spend would it take to get the story of the cronut distributed to the readership of the NY Post, and the various other blogs which picked it up? Getting Mugowitz to notice must be incredibly valuable in itself! Pretty efficient use of goodwill capital, I think. Yes, everything has a price. It just is not always measured in money.


Do you have suggestions on where we could find more examples of this phenomenon?