17 August 2012

How to Increase Income by 2000% Through Voluntary Price Discrimination

Price discrimination means that some customers pay more than others for the same product at the same vendor. One such case is overcharging tourists. For example an ice-cream vendor in Prague can write on his “price list”: “zmrzlina = 1 Euro” and “Ice-cream = 2 Euros”.  As you may have guessed “zmrzlina” means ice cream in the very beautiful and melodious Czech language.

This type of price discrimination is not voluntary since any tourist would prefer to pay 1 euro instead of 2 Euros for an ice cream. Any sound-minded tourist would ask for a “zmrzlina” (and not for “ice cream”) if she would know what it means and more importantly be able to actually pronounce “zmrzlina”. (no offence to the native speakers of Czech or other Slavic languages, but for most people is really hard to pronounce zmrzlina).

Yesterday I’ve stumbled upon a very nice (and hilarious) example of voluntary price discrimination in which people (actually men) paid 20 times more on their own free will (if there is such thing). Take a look at the picture:

In case you don’t understand what the sign says here is an approximate translation: “Tax for using men’s toilet: for small penis 10 cents for big penis 2 Euros” And for the people that don’t recognize the coins, the majority of them are 2 Euros coins.

This is not only extremely funny, but it is very smart. Let’s see how:

First, it is voluntary price discrimination. Not like in the “zmrzlina” – “ice cream” case, here the vendor (let’s call it like this) does not take advantage of people not knowing a rare language. The vendor leaves the choice of how much to pay to the customer himself.

Second, it taps into the completely irrational male ego of being a “hunk”, a “macho man” and any other names we could give for that. What I think would lead to an almost 100% rate of paying 2 Euros is the possibility by others to see. I guess that if nearby an attractive woman would be visible to the customer and that he would realize that she could see how much he pays, then people (men) might actually pay more than 2 Euros.  

Third, the sign uses vague terms (and I don’t mean penis). It says “small” and “big”, but what is that more accurately? If it would have said “for penises shorter than 15cm 10 cents and for longer than 15cm 2 euros” it would have been really stupid. By using “small” and “big” no one is actually cheating since there is no clear definition of what is big and what is small. And by cheating I mean also paying 2 Euros when one should pay only 10 cents ...

Fourth, the choice of the prices 10 cents and 2 Euros is superb. The 10 cents coin is the smallest (except for 1 cent and 2 cents but which are not used too often) in the euro coins set, being smaller in diameter than the 5 cents one. The 2 Euros coin is the largest in diameter and has a feeling of an “oversized” coin. The analogy between coin size and penis size is superb. Moreover, a 2 Euros coin is noticeable and when dropped on the plate it makes a noticeable sound.

Fifth, the coins in the plate most of them being 2 Euros suggest a social norm of paying for using the toilet and not cheat. Moreover it suggests competitiveness because most of the men had “big” penises.  

My only critique is that there are too many coins in the plate. This might create the opportunity of cheating (no one will know if I paid or not) and decreases or eliminates the communication of paying 2 Euros, namely the sound made by the 2 Euros coin on the ceramic plate.

Any other ideas or examples of Voluntary price discrimination??

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