Saturday, December 24, 2005

Price discrimination on Christmas Eve 

JB Doubtless is one of those procrastinators, waiting until the very end to do his Christmas shopping. He wonders about supply and demand:
If the stores were smart, they would suspend all sales during these last few shopping days. Men are so desperate for something, anything at this point that we are willing to pay top dollar just to get it over with. 58 bucks for this scarfey thing? What the hell? $134 for a sweater with a wolf on it? Sounds good. $452 for this Danish Maple jewelry box? Ring it up!

We're bad shoppers. We admit it. We don't care. I'm just surprised someone isn't taking advantage of us.
Since businesses are not in the habit of leaving $20 bills on sidewalks, why don't firms do this and jack up prices as Christmas day nears? There can be three explanations:
  1. They would jack them up for men, who are idiots, but the law prevents them. It would be easy to price discriminate -- sell the same good to different people at different prices -- if we could just tell who the idiots are. I propose Yankee caps.
  2. The stock of gifts to buy is finite, so demand is actually dropping as Christmas day approaches. A variant of this is that the goods remaining in stores of Christmas Eve are probably just the crappy gifts the previous shoppers turned down, so it makes sense to lower prices. And given the price drops after Christmas so much, some will be tempted to provide late gifts if there's too big a drop in price on 12/26.
  3. Demand drops as Christmas Day approaches, as more shoppers are buying for after Christmas, and other shoppers have already left for the holidays on planes, trains, and automobiles buses. A variant on this theme is that the gift bought in 12/24 is for the marginal recipient -- your Aunt Thelma for who you might not have bought anything save for that "scarfey thing" that's on sale for $5.
It's fun to think of these things, and part of what makes economics such a pleasure.