Expand demand-based pricing?

by Fred MacMurray

So we’ve come to accept variable, demand based, pricing in:

  • airline tickets — you might have paid $hundreds more or less than the person you’re sitting next to depending on when you bought your ticket.
  • sporting events, where some games are now “premium” and ticket prices are higher for those games than “regular” games
  • Uber, depending on the current demand for their services
  • Auto insurance, which is based on your driving record and even your credit rating
  • Flowers (Valentines Day)
  • Some restaurants (holiday brunches, Mothers’ Day)

And there are others.

How do you feel about demand-based pricing? What if your mechanic adopted the same thing (e.g. the Friday or Wednesday before Thanksgiving it costs 2x the normal rate because everyone wants their car looked over, the oil changed and tires rotated before the big drive to Grandma’s)? Your barber / hairdresser? Why are we accepting/understanding of this scheme for travel, but not for some/many other day-to-day things?

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107 thoughts on “Expand demand-based pricing?

  1. “Why are we accepting/understanding of this scheme for travel, but not for some/many other day-to-day things?”

    But doesn’t most everyone do it already? Everyone has sales, a/k/a “let me reduce the price for things for which there was no demand.” Many bars/restaurants have happy hours and specials mid-week, a/k/a “let me reduce prices to bring in customers and sell things on days we usually have low demand.” Power companies sell at different rates based on time of day/anticipated demand. Etc.

    If the point of capitalism is to match supply and demand, then demand-based pricing would seem to be the most efficient way to get there. I actually like the Uber model because it is at least transparent, whereas when I go to Safeway or Wegman’s I don’t necessarily know whether they are going to have useful specials on the things I want that week.

    But not sure I’d put insurance in that category — rates are based on their claims experience (e.g., they try to project future claims based on a variety of factors that are associated with higher/lower claims), not based on how many people want to buy their product. So the rates are highly variable in individual situations, but the variability is not driven by demand.

  2. sporting events, where some games are now “premium” and ticket prices are higher for those games than “regular” games

    It’s more than that now – they adjust prices as it gets closer to the game based on availability and what they think the demand will be.

    I’m mostly accepting of it, but I prefer when it’s spun as discounts from the regular price for low-demand times or games rather than increases from the regular price for high demand times. I know it’s exactly the same, but it feels better when you think you’re getting a discount rather than paying more.

  3. But doesn’t most everyone do it already? Everyone has sales, a/k/a “let me reduce the price for things for which there was no demand.” Many bars/restaurants have happy hours and specials mid-week, a/k/a “let me reduce prices to bring in customers and sell things on days we usually have low demand.”

    That’s my point: they have full price, and they have sales. They don’t have prices labeled as “surcharges” or “higher than full price”.

    Power companies sell at different rates based on time of day/anticipated demand. Etc.

    Power is totally different because their rates are set by the PUC. Yes, the rates are higher or lower at different times of day or of the year, but they don’t increase the rates for the upcoming week because the forecast is for extreme heat and they know everyone will be using the AC.

  4. Fred – I am not aware that most people object to demand based pricing in everyday life. In fact, I think many people would prefer it – If you need something Right Now but it is rationed by wait time and scarcity, you would be happy to pay a bit extra. And if you need something At a Good Price but have no time constraint, you would prefer to be able to purchase it for less by buying it off season or with longer delivery time or scheduled on a service provider’s fill in wait list. After all, people clip coupons and expend gas to find bargains or buy seasonal items to store for 330 days till next year. Even at the hairdresser there is a premium to be paid for the best stylists – both a financial premium and difficulty in booking – but it costs less for the newbie and she has an appt convenient to your schedule. The idea that there is a set price and anything else is bogus went out with fair trade laws.

    I read an article recently that rich people, other than tyrants, get a frisson out of having to wait for a craftsman or very elite fashion house to make them something bespoke or only available to the few (Princess Grace’s favorite purse has always been like that). They are not price conscious, so waiting for a bargain is meaningless to them – it is all about access and exclusivity.

  5. “but they don’t increase the rates for the upcoming week because the forecast is for extreme heat and they know everyone will be using the AC.”

    But our power company does “power conservation days” based on those projections — they give you bonuses on specific days based on how much less power you use than average. We had one day happen when we were out of town and I had turned off the AC, and we “earned” a $45 credit!.

    Now, ITA that this is much more palatable than surcharges. But they’re both variants of demand-based pricing. I think the smart companies will be the ones who figure out how to really work the demand-based system by reframing things as “incentives” and “deals” vs. “surcharges” and “penalties”.

  6. I think the demand-based pricing is wider than what is listed – food in grocery stores, energy cost to heat/cool homes in the hottest/coldest parts of the year, etc. In many of these industries consumers can see the direct correlation between limited supply and demand….only so many planes and seats, but many more people wanting to travel during those times. These industries/businesses find that consumers respond by being willing to pay and the business can benefit.

    In others, the consumers respond by not using the business or only selecting lower demand days/times and shifting to always pay the lower price. In the second case, demand-based pricing is hard for the business to administer.

    And, that is what I think it comes down to…if it takes more time to administer or consumers continue to shift to lower cost days/times than the extra money will offset, then it is not worth it to the business to engage in demand-based pricing.

    Somewhat related – If something is convenient, you are willing to pay more. Cleaners A is on your route to/from work, but cost 10% more than Cleaners B that is very out of the way. This might be better termed location-based pricing.

  7. I typed before I had a chance to read others comments. To be clear, my stylist charges me X for the service I get regardless of the day of the week or week of the year I see her. She does not engage in demand-based pricing herself. But, she does when you compare her to other stylists when you look at the price she charges and her availablity. If she is in high demand, her prices rise.

  8. From the standpoint of the provider, I think it is a great thing. It allows them to smooth their workload by incenting people to not wait to the last minute. And for those customers that do wait and therefore require the provider to work some very long stressful days, the provider can at least earn a premium for the additional stress.

  9. Would this apply to emergency situations? I.e. your car breaks down completely and needs to be towed in. Do you feel that you should be charged more than $100 per hour by your mechanic because it’s inconvenient? So, not only are you out your car, you get price gouged too?

    I can see this price structure for routine maintenance, but emergencies cannot be prevented entirely. Even the most well maintained car can have an issue with an errant rock or branch or road debris that causes an issue.

  10. DD & LfB – I completely agree with the discount vs surcharge psychology. That’s why “buy/stock up now and save!” is so powerful.

    Like getting the ski resort postcard in the mail yesterday reminding me that if I buy my kid’s pass by mid-Sept, I can get it for X% off the list price, which is already a discount off the walkup price (assuming the pass is used for all 10 sessions or whatever)

  11. Rhode, I agree and that’s why there are always reports about price gougers after hurricanes and other natural disasters. And there are laws to protect consumers from it.

    And I’d be pissed off if my mechanic demand-priced me in the situation you mention. I bring them a lot of business since we have 5 cars.

    But in the absence of a mechanism to address demand spikes, what’s my mechanic supposed to do when I have a fixable but unforeseen problem (something that will take time and needs to be done to make the car safe/reliable, not just I need a new headlamp) during the MTW before Thanksgiving and he’s all booked up? To give me good customer service, does he ask one of his techs to do it on overtime and just suck up the extra cost? Should he pass along that additional marginal cost to me? He does not want to say, “I can’t do it, but I know the shop down the road can get it done.” Although that would solve my problem, he might, I say might lose my future business to the other guy if I think he’s responsive.* Is the right answer, when you’re full, you’re full and there’s nothing I can do about it? I think not. Does he tell me he needs to charge me an extra $25/hr labor because he’s got to pay his tech OT?

    *OTOH, I more probably would say, good, immediate problem solved and I’m glad he has a backup plan (oh, and he’d probably stand behind the other guy’s work if there were a problem, since I went there at his suggestion).

  12. Rhode – The tow may cost more in bad weather or off hours if you don’t have AAA or if it is too far away from the chosen mechanic. Or if the only part available quickly is dealer stock instead of aftermarket, it may cost more. Or if the part has to be airshipped in for a old or foreign model Obviously these are not unfair pricing. If you want him to bump your car to the head of the queue, you should pay more or should have a long standing relationship with him so that he wants to do your job first. If you don’t mind waiting a week till he can get around to it because he is backed up with other jobs, then there should be no price difference.

  13. Rhode – My HVAC went out in January during one of the big cold snaps. I was severely price gouged, no question, probably charged 75% more than I would have been in a low season repair, but I had animals, no place to go and in some sense it was my fault because I kept putting off the whole house replacement very spring and then it was winter again, so I’ll do it next year. The guy did a good job timely, but made me feel like he had done me a huge favor by even returning my call. Maybe so, but I paid for that favor. When spring came I did not wait to replace the water heater (finished basement utility room – already one year past warranty). However, I did not patronize the HVAC guy but found someone else on a personal recommendation who did a terrific premium job with some extras for a non bargain but “fair” price.

  14. This post made me realize that there is more demand pricing built into my daily life then I realized before I thought about it. I thought of many examples from the last week.

    For example, I paid twice as much for lice check after camp because she charges more when she’s mobbed on the weekend when everyone comes home. I paid much less at a meter to park outside of midtown. I paid less for Wed matinee tickets to a Broadway show vs. weekend evening performance.

    I’ve been getting a lot of school supplies for a very low price because so many stores have loss leaders to try to get you to buy everything in one place weeks before school begins in Sept. All of the prices get much higher in September when selection becomes scarce in some stores.

  15. “This post made me realize that there is more demand pricing built into my daily life then I realized”

    Me too, and it usually works well as far as I can tell.

    In general I support demand-based pricing, and offhand I can’t think of many situations where I would oppose it.

    In the case of natural disasters price gougers are despised by many, but I’ve seen the argument made to let market prices prevail. For one thing, this motivates service providers to travel to the affected area and effectively speeds up the clean up process. Also, it discourages hoarding of water and other essentials, thereby allowing more people access to these items.

  16. But our power company does “power conservation days” based on those projections — they give you bonuses on specific days based on how much less power you use than average. We had one day happen when we were out of town and I had turned off the AC, and we “earned” a $45 credit!.

    I’ve never heard of that, interesting concept. The only thing we have is you can let Xcel install a switch on your AC so they can turn it off whenever they want and they’ll give you a $25 per year credit.

  17. “But not sure I’d put insurance in that category”

    I had the same thought as I read the OP.

  18. “I’m mostly accepting of it, but I prefer when it’s spun as discounts from the regular price for low-demand times or games rather than increases from the regular price for high demand times. I know it’s exactly the same”

    I don’t think it’s exactly the same.

    If I’ve spent some time considering whether to buy something and, in some cases, juggling schedules or finances to make it possible, then when I go to buy it and it’s discounted, I’m happy and go ahead with the purchase. But if it’s now more expensive, I’m annoyed because I may decide not to buy it, and all that effort went to waste.

  19. “To be clear, my stylist charges me X for the service I get regardless of the day of the week or week of the year I see her. She does not engage in demand-based pricing herself.”

    Sure she does. She’s in higher demand than the less experienced stylist, and so she charges more. It’s not based on time, but it’s still based on demand.

    Similarly,

    “If something is convenient, you are willing to pay more.”

    Again, the convenience increase the demand. If the convenient provider charges more, that’s demand-based pricing.

    It’s also basic economics, looking at the total cost, not just what you pay the provider. The convenient provider may well offset his or her higher charge by reducing your cost in time and transportation costs.

  20. Rhode, I once had our car refuse to start in a shopping center parking lot.

    I had it towed to our regular mechanic. He is in demand, and he’s typically scheduled at least two weeks out. When I called him from the shopping center, he scheduled me for his next available time, which was about two weeks out.

    I was fortunate that we were able to cover our transportation needs with a combination of borrowing FIL’s car, my brother’s truck, and using my bike, but had those not been available, I might’ve had to rent a car.

    Had I been faced with a choice of renting a car for a couple week, and paying a higher price to expedite the repair, it may have still cost me less to pay extra to expedite.

  21. “lice check”

    The local public schools recently announced that lice are not a reason to keep kids out of school, a decision that IMO makes a lot of sense. It probably also reduces the demand for the lice checkers.

  22. Growing up, on the three or four hottest days of the year, my Dad’s plant shut down to reduce demand on the grid. The power company made it economical for them to shut down during those days and make up the demand on other days with lower power demand.

    I find the most interesting questions about demand-based pricing occur related to two areas where we want “everyone” to have good service, utilities and healthcare. One of the challenges regarding utility rate setting is how fast service should be restored during a weather emergency. During major weather emergencies (hurricanes), repair people and equipment are usually brought in from out of state to restore service more quickly than could be done with in-state resources.

    I think our current healthcare system causes expensive capital equipment (MRI’s, operating rooms, etc.) to be underutilized. One of the possibilities to limit rationing if the U.S. were to transition to a single payer (government-funded) system would be to pay providers who worked nights/weekends at a higher rate, along with those who worked in less-desirable locations, and for people willing to accept inconvenient appointment times/locations to have a lower deductible/copay or to have their scan/surgery more promptly. Unfortunately, we know that humans don’t function as well at night, on average, so it’s not clear that better utilization of capital would result in outcomes comparable to those we achieve by allowing surgeons to work during their “best” hours as humans.

  23. I think I may be the least “location-based” pricing person around… I tend to stick with businesses I like, despite the drive/convenience.

    We have one cleaner that is sorta kinda if you squint, on our way home. Cheaper options may exist but they treat my clothes well. Our mechanic is completely and utterly out of the way (south of our home when our entire lives are based to the north). But he’s good, salt of the earth, shows you the parts kinda guy. My FP is in another state. I have to make a special trek to get my taxes done (though I could do everything by mail if I wanted) and he takes my calls about all sorts of strange financial questions for no extra charge.

    Meme – I know these kind of gouges exist. I’ve been victim to them, but it doesn’t mean I like it.

    And I guess Finn is right on the car thing – we sit in a privileged position where we can make life work without a car for 2 weeks, but others aren’t so lucky. Renting a car, or paying a premium for service to be done sooner might be out of other people’s reach financially.

  24. “I read an article recently that rich people, other than tyrants, get a frisson out of having to wait for a craftsman or very elite fashion house to make them something bespoke or only available to the few”

    This reminds me of some local friends who seem to value a product or service more the farther away it is from where they live. The “best” car mechanic is several towns away in CT, the “best” restaurant is never the closer one, and when they were remodeling their kitchen the “best” cabinets required driving almost two hours to see samples. Needless to say, they put a lot more miles on their cars than we do.

  25. Back to my stylist – she could likely charge more for her 5 – 8 pm and all day Saturday appointments as they are more in demand than the 10 am to 4 pm Monday – Thursday appointments. Plus, charge more than the less experienced stylist. So, in some ways there can be multiple levels of demand pricing for a given service.

    The other point I was trying, and I don’t think I made, is that convenience for one customer is not always for another. The cleaners example..it was on my path every day to and from work. Had good prices and daily deals (every Monday shirts were discounted, every Tuesday suits, etc). The best part was after your one year anniversary as a customer, you got the daily deals price on every item regardless of when you brought it in. Then I changed jobs and this cleaners was slightly out of the way. After about 3 months I changed for convenience, even though my price went up about 15%.

  26. Rhode,

    I think location is based on how much time it takes, how often you use it, and how much you value it. My accountant is on the other side of town, but now with all the electronic filing of stuff, I physically go there less than once a year. The fact that it takes me over an hour each way the hours he is open doesn’t cause me too much pain and I like the job he does. However, if I had to go there monthly, I would hate the wasted time and would likely look at changing. On the flip side, I like my dentist. Since it is no longer on my commute route, it takes about 30 min to get there, but he offers a 7:30 am appointment time that means I miss a lot of the traffic. Even if I needed fairly extensive work or a lot of visits, I would continue to make the trip.

  27. On pricing the department stores and their sales are the biggest scam. Now, customers either take their business online or wait till they get the price the store should have charged in the first place.

  28. “Renting a car, or paying a premium for service to be done sooner might be out of other people’s reach financially.”

    That wasn’t my point. My point was that it might still be worth it for you to pay a premium (e.g., OT to the mechanic) to get your car fixed right away because that would save you in other costs.

  29. Not directly on topic, but hopefully not too much of a tangent. I’ve noticed stores that cater to men (auto parts, home improvement) tend not to have sales/gimmicks but stores that cater to women (department stores, craft stores) have sales/gimmicks. Grocery stores have both models, where some stores have weekly ads and some don’t.

    Our weather doesn’t match the seasons in stores and “wardrobe management” so that we have snowpants, boots and sandals that fit in the season we need them is my job. I posted last ~December 3 when Walmart was clearancing out snowpants, because in my world, that’s way too early to stop carrying snowpants. You should stop carrying snowpants in ~April.

    Our ability to do stuff (crabbing, sledding, skiing, etc.) spur-of-the-moment requires me to have appropriate clothing for everyone, where “appropriate” may involve needing to wear two pairs of socks to keep your boots on.

  30. stores that cater to men (auto parts, home improvement) tend not to have sales/gimmicks

    Wow, they follow an unusual model where you are. Here there are fliers pretty much weekly for national chains (Ace, Home Depot, and Lowe’s), a local chain has regular sales (often with an Onion knife or machete on special as a loss leader), even the semi-industrial places will have ads in the sports section for a sale on generators or Stihl equipment or that sort of thing. And the auto parts stores likewise will send out fliers in the Sunday paper maybe monthly, advertise specials in the sports section, and so on.

  31. WCE – I feel that’s related to this discussion of supply and demand. The “changeover” between seasons is very jarring and annoying. It’s not just the Halloween decorations that are out now, and back-to-school sales starting in July in New England. It’s the fact that one cannot find a swimsuit in July that is completely out of whack. Or snowpants in February.

    Now, are the consumers across the nation demanding Halloween decorations in August? Or back to school in July (possible)? Or fall gear in July with no swimsuits? Or are the stores convincing the consumers they “need” all these things out of season?

    To me, the extension of these seasons to ridiculous proportions is a massive shopping turnoff. I live in New England. NO school goes back until the last week before Labor Day. I do not need Back to School sales on July 5th. I do, however, need swimsuits available on July 5th, not fall clothing (seriously, Target clearanced all their summer stuff right after July 4th… I picked up picnic gear at 70% off on July 6th). We won’t be wearing pants until sometime in September. Same thing with snow gear – I don’t need a swimsuit in February, I need snowpants. I’m not buying all my snow gear in October.

    Sadly, because I know I need these things, I am forced to purchase when available, feeding into the store’s assumption that I am demanding winter gear ready for purchase in October. It’s a vicious cycle.

    Speaking of that – I have to start looking at my Halloween decoration kitty… I’ll buy the stuff on sale in the beginning of Oct…

    Finn – I realize that’s not your point. But your point, and this conversation as a whole, brings up some other tangents – like the people who can’t afford the premium or the rental car.

  32. HM – Harbor Freight has the same sale prices every week… At least according to the circular that comes in the mail… the same stuff is always on sale.

  33. WCE – without getting into specific stores, do you think that stores that cater to women have sales/gimmicks to enable women to think, maybe even say to their husbands, “I saved this much!” vs places that cater to men who perhaps do not think along the lines of “I saved…” but, rather, just how much something costs.

    DW (Marketing degree) really hates it when I (Econ/Finance as if you couldn’t tell) point out the facts in this sort of instance, so I have learned to curb myself around her. But my 3 DSs understand me when I say that if a jacket is marked as $100 original, now $20 on sale, no one “saved” $80. They spent $20. Oh, and today, it most definitely is NOT a $100 jacket on sale for $20. It is clearly, driven my whatever market forces are in effect, a $20 jacket. Just like the stock market. Tomorrow could be different.

  34. “but they don’t increase the rates for the upcoming week because the forecast is for extreme heat and they know everyone will be using the AC.”

    Unless you are Enron selling wholesale energy in deregulated California in 2001.

  35. Finn, I’ve never lived anywhere with Best Buy or other electronics store so I forget about them. I suspect you’re right.

  36. “to enable women to think, maybe even say to their husbands, “I saved this much!” vs places that cater to men who perhaps do not think along the lines of “I saved…” but, rather, just how much something costs.”

    Fred – I do. Kohl’s puts “look how much you’ve saved” on the bottom of receipts, as does Michael’s, AC Moore, Joanne’s, and Stop and Shop. Places routinely shopped by women.

    My Lowe’s receipts (I do not think) say “look how much you’ve saved”. They tell me that everything I’ve purchased was stored on my “My Lowe’s” card so I can look up what kind of ceiling fan I purchased 8,000 years ago.

    It’s all marketing to gender stereotypes.

    Do I think Kohl’s “saved” me $100 plus? No, I spent $20 after “sales” and rewards points. “marked as $100 original, now $20 on sale, no one “saved” $80. ”

    What if you put that $80 into a savings account the same day you made the purchase? If you were comfortable spending $100 but got the jacket for $20, and could put the money away, did you then save $80?

    DH and I are going to do that next year on our food bill – if S&S tells us we’ve save $20, we are going to move $20 to a savings account or digital envelope in YNAB or something similar.

  37. @ Rhode – this is part of why Amazon’s business model is so successful. They “carry” these things year round, and it’s pure on-demand purchasing.

  38. “do you think that stores that cater to women have sales/gimmicks to enable women to think, maybe even say to their husbands, “I saved this much!” vs places that cater to men who perhaps do not think along the lines of “I saved…” but, rather, just how much something costs.”

    I’d put it slightly differently — I’d say it’s a throwback to the old dad-as-breadwinner role. Mom needs the sales to justify to her husband how much she saved; dad makes the money and so doesn’t need to justify what he spends to anyone.

  39. If I’ve spent some time considering whether to buy something and, in some cases, juggling schedules or finances to make it possible, then when I go to buy it and it’s discounted, I’m happy and go ahead with the purchase. But if it’s now more expensive, I’m annoyed because I may decide not to buy it, and all that effort went to waste.

    Exactly.

    Here’s an illustration. The Rockies used to assign games to four or five different pricing tiers. In order from cheapest to most expensive they were something like “value”, “standard”, “premium”, and “special event”. So the way it read was there was a regular price and some games were at a discount and others had an extra charge. You’d look at the higher tier games and think “is this game worth paying extra for?” If they had reworded the groups so that the highest was “regular price” and the others had names that implied various levels of discounts, I probably would have been more willing to pay for the higher prices.

  40. Oh, and today, it most definitely is NOT a $100 jacket on sale for $20. It is clearly, driven my whatever market forces are in effect, a $20 jacket. Just like the stock market. Tomorrow could be different.

    I understand your point, at the same time, the key factor is the quality of the jacket. Usually, a jacket that regularly sells for $100 is much better quality than a jacket that regularly sells for $20. When the $100 one is discounted to $20, it’s still a better jacket than the other one. It’s a $20 jacket in terms of price, but it’s not a $20 jacket in terms of quality. That’s why it’s a savings.

    Of course not all jackets that sell for $100 are that much better quality-wise.

  41. but if it is Kohls, it is a $100 jacket that is 50% off sale every week, + an extra 15-20% off on top of that for the real price

  42. “(Econ/Finance as if you couldn’t tell)” – Oh we could tell. =)

    I hate all the gimmicks that come with shopping. I get no pleasure out of “saving” for exactly the reasons Fred describes – the saving is not real. It takes too much planning. I’m already considering what snow jacket my son will need this year so I can purchase one when LL Bean has them in stock. Ideally, I could purchase it when he needs it (and in the correct size) but by then they’ll be out of stock. Picking out winter coats on a hot, humid August day is ridiculous.

    (Just spent 45 minutes on the phone with CIGNA, I’m a bit grumpy.)

  43. I think our current healthcare system causes expensive capital equipment (MRI’s, operating rooms, etc.) to be underutilized. One of the possibilities to limit rationing if the U.S. were to transition to a single payer (government-funded) system would be to pay providers who worked nights/weekends at a higher rate, along with those who worked in less-desirable locations, and for people willing to accept inconvenient appointment times/locations to have a lower deductible/copay or to have their scan/surgery more promptly.

    Our orthodontist does this. He gives a 5% discount if you agree to have all the appointments between 9 and 2.

    On the utilization of equipment, part of it is that they need to leave a lot of open time, especially in the hospitals, for patients who need emergency tests done.

  44. “We won’t be wearing pants until sometime in September.”

    That’s a different spin on who wears the pants in a family that I hadn’t heard before.

    What does your DH (not to mention baby Rhode) wear below the belt in the meantime?

  45. BTW Rhode, I’ve never had a problem finding a swimsuit to buy here at any time of the year.

  46. “this is part of why Amazon’s business model is so successful. They “carry” these things year round, and it’s pure on-demand purchasing.”

    A couple summers ago, we’d decided we were going skiing the upcoming winter and started shopping for ski stuff. I got some helmets and goggles from Amazon for less that $20 each. About 6 months later, the helmets were about $80 and the goggles were about $35.

  47. Rhode – this is why I never go to stores to get things. ;) I buy all the swimsuits, winter jackets, etc., online and they are always available when I want them.

    Did anyone else read Dan Ariely’s book “Predictably Irrational”? He talks a lot about “anchor” pricing, so if something has an MSRP of $X but is on sale for $0.6X, you think it’s a good deal, whereas if something has an MSRP of $0.6X, you think it’s lesser quality. This is why there are so many sales.

  48. “DH and I are going to do that next year on our food bill – if S&S tells us we’ve save $20, we are going to move $20 to a savings account or digital envelope in YNAB or something similar.”

    We have done that…we use actual cash and put it in one of our alma mater mugs…then we use it as a date night fund.

  49. “Our orthodontist does this. He gives a 5% discount if you agree to have all the appointments between 9 and 2.”

    If I were an orthodontist, I would consider later hours on at least some days, e.g., staying open until 6 or 7 or 8pm.

    My kids’ HS ends at 3:30, and the orthodontist’s office closes at 5, and there’s only one day a week when he’s at the office near the school. It’s very difficult to get an appointment those afternoons.

  50. L – of course I read it. And pretty much anything Dick Thaler has written, most recently “Misbehaving” about, you guessed it, how people behave irrationally on many fronts, not just eceonomically.

  51. Usually, a jacket that regularly sells for $100 is much better quality than a jacket that regularly sells for $20

    But this assumes the jacket ever sold for $100 in most cases an item marked down that much has never sold for $100.

  52. If the orthodontist (doctor, lawyer, mechanic, really any service provider) truly wanted to be customer-friendly s/he would set up the office hours to be e.g. noon-8pm a couple of days each week. The early times catch people who can leave work for the appointment, the later times work for those who can’t.* That’s why places like PepBoys, MIdas or other chain car repair places succeed…you can make an appt and take your car in for an oil change after work, or even after dinner in some cases it that works for you.

    But, of course, that could make it harder to attract office employees.

    related mild rant…why do medical offices, especially pediatricians, stop answering their phones at something like 4pm? Just for appt setting or talking with the nurse re if this is something to be concerned with.

  53. “But this assumes the jacket ever sold for $100 in most cases an item marked down that much has never sold for $100.”

    At department stores, I know you’re correct, even if the FTC hasn’t been able to prove it.

    But many times, even online, I know stuff has sold at full price, like e.g. at the ski shop, but now it’s April and they have one of them left in men’s small or xxxl or a less-favored color and they just want to move it so they really do knock the price down my 50% or more. So many times I have been sucked into the online sale only to find the selection was very limited and/or in no color any rational person would choose.

  54. “But many times, even online, I know stuff has sold at full price, like e.g. at the ski shop, but now it’s April and they have one of them left in men’s small or xxxl”

    Yes, if you are an unusual size you can get deals. It’s a mixed blessing in that it can be hard to find exactly what you want in your size, but sometimes you can find the shoes that were selling at $150 a pair marked down to $24 because it’s the last pair left and it happens to be your size.

  55. “and/or in no color any rational person would choose.”

    That’s when I think to myself, oh, that’s why it is on sale!

  56. The guy who cuts my hair works most days from 11 to 7 or 8, and all day on Saturdays. He set his hours based on when when his customers are available.

    “why do medical offices, especially pediatricians, stop answering their phones at something like 4pm? Just for appt setting or talking with the nurse re if this is something to be concerned with.”

    When I was with an HMO, they had a 24 hour line staffed by nurses that you could call to ask medical questions, and they’d tell you when you need to see the doctor, go to the emergency room, or just stay at home, and what sort of care to provide at home and what to watch for. They also sent a book (IIRC, every other year) with information for various symptoms and maladies to provide similar guidance.

  57. Our schools start in September and the local grocery chain put away the back to school displays and brought out Halloween candy on *July 29*.

    They are a regional chain so they do not serve any town that starts before the last few days in August.

    I actually considered calling their corporate headquarters and asking to talk to the person who heads their seasonal department, because I know that I will be looking for the supplies the teacher wants in the second week of September, along with millions of other mothers. (We get a list in June but it is never the final list.)

  58. The reason that the MRI is not running all night long is that no one wants to staff it. Rad Tech is an in demand career and few want to work nights. Hospital can’t charge extra for a 7p MRI, so why do it? The times that are most convenient to you, are also the times that many people want to be at home.

    I agree, I am often surprised by the lack of dentists, physical therapist, etc. that offer evening and weekend hours. My conclusion from this is that there is very little competition for customers.

  59. “The Rockies used to assign games to four or five different pricing tiers. In order from cheapest to most expensive they were something like “value”, “standard”, “premium”, and “special event”. So the way it read was there was a regular price and some games were at a discount and others had an extra charge. You’d look at the higher tier games and think “is this game worth paying extra for?” If they had reworded the groups so that the highest was “regular price” and the others had names that implied various levels of discounts, I probably would have been more willing to pay for the higher prices.”

    So I wonder, maybe they’re trying to have it both ways? I think certain people (you, me, etc.) respond well to discounts/deals. OTOH, per Meme’s post above, there appears to be a significant portion of the population that responds well to signals that certain things are special/unique/something the hoi polloi can’t get in on. So you and I will start looking through the “value” options, whereas others may be attracted to the “premium” option. Maybe it just seems weird here because most marketers are focusing on just one of the demographics — you don’t usually try to sell the same thing to both sides of the equation.

  60. I agree, I am often surprised by the lack of dentists, physical therapist, etc. that offer evening and weekend hours. My conclusion from this is that there is very little competition for customers.

    We see our dentist on Sunday mornings. She’s teaches and keeps a small practice on the side.

    But most people don’t want to work evenings and weekends, so if you can stay in business working regular weekday hours, why would you have extended hours? Plus it’s probably more expensive to hire support staff to work the off hours.

  61. If I were an orthodontist, I would consider later hours on at least some days, e.g., staying open until 6 or 7 or 8pm.

    I’m thinking the orthodontist doesn’t think the extended hours would make him/her any more money, so what’s the incentive?

  62. Around here we have a plethora of dentists, probably around ten or so offices within a mile of my house. They typically offer evening and Saturday hours.

  63. related mild rant…why do medical offices, especially pediatricians, stop answering their phones at something like 4pm? Just for appt setting or talking with the nurse re if this is something to be concerned with.

    They need the time to call back the people who called earlier in the day, call patients with test results, etc. I agree they should at least have a scheduler available through the end of the day.

  64. Yes, we got back last night. An hour late because they were late loading the luggage. I’ll write a summary later tonight.

  65. The reason that the MRI is not running all night long is that no one wants to staff it

    I assume that’s for a community hospital and UCLA or Cook County would be staffed 24/7?

    I also surprised no one wants to staff it. I know a bunch of people who worked 11-7 so their spouse could get the kids off to school and the other patent would be home when the kids got home from school.

  66. My dentist is now closed on Friday. I was so mad with the new schedule but will stay because he is close to my house.
    My doctors also tend not to give appointments on Friday. When I had to change doctors, I just picked one who worked on Fridays.
    When we moved here I made sure to pick services close to home and it has really saved us a lot of time. The medical community here however loves a three day weekend.

  67. Ada/Rhett, how is the capital cost of medical equipment handled? Why don’t we have half as many MRI machines in the world used 150 hr/week instead of 75 hr/week, or whatever the relevant numbers are?

    I would guess the cost of a rad tech is less than the hourly depreciation/operaton of the MRI machine, but maybe I’m completely wrong about that.

  68. WCE,

    An 1.5T MRI machine can cost less than $1 million and a Rad Tech makes $80k on average with benefits etc. I could see the marginal business not being worth the FTE.

  69. “Why don’t we have half as many MRI machines in the world used 150 hr/week instead of 75 hr/week, or whatever the relevant numbers are?”

    Maybe because these are huge profit centers for doctors, many of whom are opening “associated” testing labs next door to their practices? Every doctor who thinks he can do enough business to cover the cost of the machine should logically install one and then refer his patients there.

    Part of this is probably regulatory/insurance distortion (e.g., caps on office visit payments from Medicare or private insurance pushing doctors to other income sources). And part of it is a lack of holistic regulation (e.g., there is no regulator who even has the authority to determine how many MRI machines we “need” and how we can most efficiently manage them). So you have a bunch of mini-capitalists acting completely rationally (in their own self-interests) in response to their external incentives.

  70. WCE,

    A quick googling says the median service life of an MRI machine is 10 years. So that’s a depreciation of ~$10 per hour.

  71. My dentist has only has weekend hours but most of the pediatric dentists around here have hours until 6 or 6:30, and weekends. The ped dentists and orthodontists rotate the Saturdays that they work, but the orthos are open on Saturdays. There are many good choices so I think they have to provide those hours to stay competitive.

    I think it is a little different for the pediatricians because most people are looking for a pediatrician that takes insurance. They certainly aren’t earning what the ortho or pediatric dentist are earning. As a result, the doctor seems to set the hours. I still think it is a fairly long day. Our office is open 8 to 5, but they will usually accommodate you with a sick kid after 5 as long as you call before the receptionist leaves. The big change for us is weekends because our office of six peds joined a very large county medical group. No weekend hours with a specific, but they offer urgent care with an on call ped in one location. I’m really glad we didn’t have this when DD was under 5 because she always seemed to get sick during a weekend.

  72. I don’t really know anything about MRI depreciation. But they may have a cost per use associated as well. So, 10 years at 2000 scans/year is going to cost a lot less than 10 years at 4000 scans/year. Plus, the extra 10 hours of operating costs (which is not just a tech, but a registrar, and also a nurse usually. In my glory college days, I volunteered at the MRI. I think there were always 4 people there. So, at a minimum, an extra >200k per year (120k for the 1.5 rad tech, 60k for the nurse, 40k for a registrar and associated extra environmental services, not to mention electricity).

  73. Instead of worrying about night hours, some ER docs are agitating for weekend surgery and other diagnostics. Hospitals clump their surgeries in the beginning of the week, because of lack of staff and support services on weekends. The ER can’t move patients out on Tuesdays, because there are no beds in the building. So, half the ER beds are full of inpatients, the ER docs aren’t working (and in many cases are not getting paid), and the waiting room is full of angry people yelling about Obamacare. When really the problem is that nobody schedules a total hip replacement on a Friday.

    http://www.hospitalovercrowding.com/the-247-hospital-and-smooth.html

  74. Great comments. I wonder how medicine in the US would change if it had to compete with the equivalent of Foxconn.

  75. WCE,

    Foxconn? The one that manufactures 10s of millions of identical products out of 100s of million of parts some of which vary by 100s of a millimeter? I’m not sure how well the comparison would work when the inputs on a given night for Ada might be an elderly lady with ovarian cancer, a 16 year old who dislocated his ankle playing rugby, a 22 yo heroin addict with an unspecified infection at his injection site and a 55 yo male with “chest pain” that’s actually just heartburn. Oh, and hypochondriact that doesn’t actually have anything wrong with them.

  76. Here’s the Iceland report:

    We were there 9 1/2 days (6:30 a.m. arrival on day 1 and a 4:45 departure on day 10). We spent the first three nights in different places going up the west coast and then moving east along the northern coast. We stayed three nights outside of Akureryi and then three nights in Reykjavik. We drove about 1,500 miles and with a top speed limit of about 55, and often going slower on gravel roads, it was probably 35 hours of driving. We had great weather the first five days, then it turned gray with rain off and on the next three days, and then completely miserable (rainy, cold, windy) the last two days.

    The scenery is spectacular. The coastal areas on the snaefellsnes peninsula on the west coast were just gorgeous. We spent a day on the penisnula and that wasn’t nearly enough. We got caught up in a lot of “let’s stop there and look around” stops that ended up taking 30-45 minutes. We also drove a section of the northern coast that was great. We saw five or six waterfalls that were all great in their own way. I also loved Asbyrgi canyon, which is this massive canyon and with a pond at the end that was gorgeous.

    We did the volcano tour on our first day in Reykjavik. We got an email from them the night before that they weather forecast was bad and they might have to cancel it, but the weather held. It was our first time in a helicopter, so just doing the ride was great. Going down into the volcano was unreal. The elevator goes through a narrow opening and it feels like you’re going down into the center of the earth. The whole experience was amazing. The elevator stopped on the way back up, which is a normal thing, but I was a little freaked out.

    The other great tour we did was Drangey island – http://www.drangey.net/#!drangey-island/c10af It’s an island off the northern coast that is home to a million birds. You take a 20 minute boat ride, then dock in a little inlet that is swarming with birds and they are deafening. Then you “hike” up 500 feet up the side of a cliff, more climbing than hiking holding on to ropes and chains for dear life. At the end you go straight up a 50 foot ladder. It was well worth the effort, the views at the top were amazing. There’s a guide who takes you around and tells the history of the island. The climb back down was scarier than the climb up but we made it down.

    The other tour/expedition we did was a lava cave. That was really neat as well.

    We went to the nature baths at Myvatn instead of the Blue Lagoon. It is much smaller, but also half the price. And every town has a geothermal pool, so we went to a lot of those. The one in Hofsos was just a pool and hot tub (a lot of the pools have waterslides and other features) but it’s an amazing location, about 20 feet from the edge of a fjord.

    We went to a bunch of museums. The herring museum is actually really interesting. We went to an exploration museum that had an exhibit on U.S. astronauts (they did some training for the moon landings in Iceland). We went to the Icelandic Rock and Roll museum. I had no idea Iceland had such a big musical history.

    Driving was an experience. There isn’t much traffic at all, aside from Reykjavik, but they have hidden speed cameras and really expensive tickets. There are a lot of one-lane bridges, which aren’t a big deal because there’s usually not traffic coming both ways at the same time. The interesting drive was a 4 km one lane tunnel. There are pull outs about ever 150 m and the northbound traffic needs to pull over so the southbound traffic can pass. I was glad to be going southbound.

    After spending three days in the countryside and small towns, Akureryi (population 18,000) felt like a big city. We literally went three days without seeing a traffic light. Reykjavik wasn’t all that interesting, aside from the phallological museum. That was just weird.

    Everything is really expensive there. Gas is about $6 a gallon. Outside of Reykjavik, there weren’t any mid-priced restaurants. They were either expensive nice restaurants, or hot dogs at the gas stations. We just bought food at the grocery stores for breakfasts and lunches.

    It felt like the trip was a day too long, but that might have been because the weather was so crappy at the end. Overall it was a fantastic trip, truly a once in a lifetime experience.

  77. Rhett, I guess I’m not expressing myself well. I wasn’t thinking so much of Ada, but about how either private insurers or queues in a government-run system could result in a mass exodus of people who need nonemergency procedures to clinics either outside the U.S. or not governed by U.S. law on Indian reservations and whether that would be a good thing or not for the U.S. system.

    Intuitively, there should be a limit on how many people can be employed by government, in the form of healthcare spending, public schools, military, prisons, higher education and environmental regulation, but so far my intuition has been wrong.

    So far, free trade advocates mostly ignore the environmental costs of industry in Asia. It will be interesting to see what happens to manufacturing globally as the proportion of traditional labor force age people decreases.

  78. but so far my intuition has been wrong.

    Hasn’t total government spending (Federa, state and local) as a percentage of GDP been pretty much level for +30 years at about 35% of GDP?

  79. I haven’t seen too early of a start for back to school shopping but that means if you go to the stores in a day or two after school starts, supplies are gone.
    Colder weather for us is unpredictable. Some years it starts getting cooler earlier and lasts longer – that’s when people shop for cool weather clothes. In other years, all the sweaters, scarves etc. are still on the shelves and people are still in shorts and T shirts.

  80. DD,

    Thanks for the trip report! Does Iceland have unusually long summer days? And is there a time of year where weather is more reliable?
    Did your kids have a good time?

  81. Does Iceland have unusually long summer days?

    On June 21 in Reykjavik the sun sets at 12:04am and rises again at 2:55am. I really really want to go for that.

  82. Scarlett, yes, it’s very long days in the summer. Officially sunrise was around 5 am and sunset around 10 pm when we were there, but it was still pretty light at 11. My understanding is that there’s never a reliable time for good weather.

    The kids had a great time. They put up with all those hours in the car really well.

  83. DD – that trip sounds awesome! That may be a dream trip in about a dozen or so years! :)

    On the discussion of hours businesses hold – I’ve been playing phone tag with a local learning center for DS. This place is the only one I’ve called that doesn’t have a dedicated secretary. And the one who usually answers the phones has a RI accent and sounds like she’s 2. Very poor phone manners. I finally get the director to set up a tour. This is the exchange:
    Director: “Can you tour in September? We are very busy this month.”
    Me: “OK. How about September 2nd?”
    D: “Would 10:30a work for you?”
    M: “No, my husband and I have the typical 9-5 jobs. Could you do any earlier?”
    D: “No, I don’t get in until 10. I have a newborn and a toddler.”
    M: pause on my end…don’t engage, not worth it… “We’ll take 10 on the second.”

    WTH? Does she think I have all the time in the world? I wanted to scream at her – I have the same situation. But I don’t run my own business and can’t come and go whenever I please (this lady is NEVER in the building). I work for the man and can’t drop my life because you have a toddler and a newborn.

    I want to be all supportive and “pro” whatever, but it’s really impossible when the owner of a facility who needs tuition to stay in business gets all incredulous with me because she has a family. Did she think I was calling to measure her place for blinds? I have a family, too, and my job isn’t always flexible.

    It’s a good thing DH and I are visiting this place as a comparison to the place we really like…

  84. But I don’t run my own business and can’t come and go whenever I please (this lady is NEVER in the building). I work for the man and can’t drop my life because you have a toddler and a newborn.

    I suspect it is more the case that she has more than enough customers and can get new ones when she pleases. Which, as we’ve often discussed here,is a good place to be.

    What information are your trying to convey with mentioning she has a RI accent?

  85. DD – I am so glad you enjoyed Iceland. I haven’t been to the West Coast or inside a volcano yet, but I really liked the North. The weather is always chancy, and it can be cold and rainy. Their idea of beach weather is high seventies and sunny. The parts of Iceland that are ordinarily open for tourism in Winter are not Game of Thrones (scenes at the Wall are filmed in Iceland) level wintry, but there is very little light. There is great eating (not for vegetarians) in Iceland, and Reykjavik is a fun nightspot with lots of European young people flying in for long weekends.

  86. @DD — that sounds *awesome*. Not sure I’d manage that climb, though — especially if I had the kids with me (they’d be fine, I’d be too afraid they’d fall). :-)

    Our flight home flew over the southern tip of Greenland, and the weather was perfectly clear, and I have to say, it looked spectacular. Now I want to go.

  87. LfB, I was terrified the kids would fall, but as you said, they were perfectly fine. DW and I had more trouble than they did. And you can do a day tour from Reykjavik to Greenland.

  88. I suspect it is more the case that she has more than enough customers and can get new ones when she pleases. Which, as we’ve often discussed here,is a good place to be.

    Exactly. If her lack of availability was hurting her business, she’d change.

  89. “It’s a good thing DH and I are visiting this place as a comparison to the place we really like…”

    Is there any reason even to consider a place run by someone who has so little regard for her potential customers?

  90. DD, thanks so much.

    I love it and hate it when people post trip reports (not really, I only love it). So many places I want to go, so many amazing trips, I want to do it all NOW. Greedy, greedy.

  91. “Rhode – my advice – don’t even bother touring. Go with the one you like.”

    Agreed!

    To the idea of “If she didn’t have enough business, she’d change.” Maybe. Another possibility is that she’s not a very good business owner. Don’t underestimate how many small business really aren’t run very well & eventually fail because of it.

    @DD – thanks for the report. Sounds great! I think 9 days would be just a hair too long for me on almost any trip. (at least at this point in my life while working/juggling kid stuff, etc)

  92. “Don’t underestimate how many small business really aren’t run very well & eventually fail because of it.”

    Yeah, that. I distinctly recall some stupid-idea shop opening at the bottom of our hill in CO [something like “learn to arrange flowers!”], and thinking, wow, I can’t believe they have enough demand for that. They didn’t — closed within 3 months (added level of incredulity that not only didn’t they have a business plan, they didn’t even have cash to cover three months).

    Unfortunately, there is little karma in businesses; if demand is higher than supply (such as, say, kid-care stuff), many bad business owners can hang on for years. But why would you choose one of them if you have other options?

  93. To the idea of “If she didn’t have enough business, she’d change.” Maybe. Another possibility is that she’s not a very good business owner. Don’t underestimate how many small business really aren’t run very well & eventually fail because of it.

    All the more reason not to bother with the tour.

  94. I think 9 days would be just a hair too long for me on almost any trip.

    I think if the weather at the end had a lot to do with it. It’s not as much fun touring outdoor attractions when you don’t want to get out of the car.

  95. “either private insurers or queues in a government-run system could result in a mass exodus of people who need nonemergency procedures to clinics either outside the U.S. or not governed by U.S. law on Indian reservations and whether that would be a good thing or not for the U.S. system. ”

    Another possibility is the emergence of separate medical system(s) on top of the government-run system, sort of like private school systems.

    As with private schools, those not availing themselves of these separate systems would still benefit because those who did would leave money on the table for those who don’t.

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