Pop quiz
Question 1 (easy): Mobile phone companies often offer plans with a fixed regular subscription fee plus a per-minute usage charge (a two-part tariff). Why isn’t gasoline sold in this way?
Question 2 (slightly harder): Why don’t hairdressers offer plans with, say, an annual membership fee plus a per-haircut charge?
7 Comments
http://www.johnallans.com/
Felix: Man, you Americans are so much more sophisticated than the rest of the world. My theory was that hairdressers don’t offer subscription plans because they are quite competitive (competition undermines price discrimination). Maybe this John Allans has a lot of brand loyalty?
I was waiting for the answer for the 1st Q for a while… Anyway, I guess it’s because the unit cost of call/air time is a lot lower than the unit cost of gasoline. And for fixed costs, that is the other way around.
Jiani: Nope. It’s because gasoline can be easily arbitraged between consumers whereas phone minutes (and haircuts) cannot.
Aaron, you think that hairdressers are (a) competitive and (b) don’t have brand loyalty? Do you know any, um, females? They’d sooner shoot a puppy than cheat on their hairdresser, most of them. John Allan’s realizes that men don’t have the same brand loyalty, so they lock it in with pool tables and membership fees (and cute female hairdressers).
Felix: Hmm, interesting. I thought hairdressing should be pretty competitive because there are basically no economies of scale (one can only do so many haircuts per day) and entry doesn’t seem very difficult.
But maybe brand loyalty is very strong, as you said. So why don’t we see more subscription pricing, especially for women?
My mom pays a membership fee to her hairdresser and does pay extra when she wants extra things done too.
p.s hah, she can’t constantly be on my back asking me to cut my hair now that I’m bald.