Tuesday, 26 October 2004

Cover prices

Steve Landsberg asks:

How come a sandwich at the airport deli costs me twice as much as a sandwich at the deli down the block, but they’ll both sell me a newspaper for the exact same price?

My guess: the newspaper has a suggested retail price on its cover, and therefore if the airport vendor tried to take advantage of its capitive audience the consumer would object to the price inflation. Deli sandwiches don’t come with sticker prices, so consumers don’t mind the price variation as much. (I also suspect the profit margin for retailers on newspapers is somewhat higher than on sandwiches, but I’m not sure that matters as much in this case.)

4 comments:

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Demand for food and demand for newspapers differ in elasticity; going without a newspaper for a few hours is much easier than going without food for that amount of time. In addition, there are more substitutes for a newspaper; you can always telephone someone and ask them about the news, but unless you want to go back through security there’s nowhere else to eat.

 
[Permalink] 2. carter wrote @ Tue, 26 Oct 2004, 5:15 pm CDT:

The deli owner captures the value from the higher priced sandwich, and the deli owner would capture the value from selling a newspaper at a higher price, not the producer of the newspaper, which is why, as you note, newspapers have prices on them, to prevent re-sellers from capturing the excess profit from selling in an area of greater demand (note that the deli at the airport does not actually own the newspapers (or magazines) it sells). A newspaper company could theoretically print newspapers with various prices for various locations, but given the complexity of doing so and the uncertainity it would create for consumers, it does not make sense.

 

its because of utility and scarcity

 

that comment is ripped directly from a Seinfeld act, I’m pretty sure it’s in I’m Telling You for the Last Time.

 
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