1 00:00:00,400 --> 00:00:03,240 Speaker 1: Am I god, seventy dollars a person. I say, okay, 2 00:00:03,440 --> 00:00:07,360 Speaker 1: and where you know, can we have the ceremony or 3 00:00:07,600 --> 00:00:09,159 Speaker 1: you know. I said something about the ceremony and the 4 00:00:09,200 --> 00:00:11,799 Speaker 1: guy says, whoa, whoa, wait a minute, this is a 5 00:00:11,800 --> 00:00:14,560 Speaker 1: wedding and I said yes, He's like, oh, that is 6 00:00:14,600 --> 00:00:26,200 Speaker 1: a hundred person. Hi, and welcome back to Bloomberg Benchmark, 7 00:00:26,280 --> 00:00:29,160 Speaker 1: I show about the global economy. It's Thursday, September one, 8 00:00:29,240 --> 00:00:31,520 Speaker 1: and I'm Keith Smith, an editor for Bloomberg News here 9 00:00:31,520 --> 00:00:34,080 Speaker 1: in New York. Dan Scott couldn't join us this week, 10 00:00:34,120 --> 00:00:36,919 Speaker 1: so instead I'm joined by a guest host, Brian Shapada, 11 00:00:37,000 --> 00:00:39,600 Speaker 1: a government bonds reporter here in New York as well. Brian, 12 00:00:39,640 --> 00:00:42,200 Speaker 1: thanks for joining us. Thanks for having mckate So. Brian 13 00:00:42,400 --> 00:00:44,680 Speaker 1: is has been very busy for the past couple of 14 00:00:44,680 --> 00:00:47,040 Speaker 1: weeks because he is planning a wedding for a few 15 00:00:47,040 --> 00:00:49,640 Speaker 1: saturdays from now right in addition to the crazy times 16 00:00:49,640 --> 00:00:52,720 Speaker 1: and treasuries and watching the Fed. Yes, planning our wedding 17 00:00:52,760 --> 00:00:54,360 Speaker 1: for about three and a half weeks from now. And 18 00:00:54,360 --> 00:00:56,080 Speaker 1: how long have you been planning that wedding for a 19 00:00:56,080 --> 00:00:58,920 Speaker 1: little over a year and are you excited to see 20 00:00:58,920 --> 00:01:01,880 Speaker 1: the planning come to an I'm psyched it's all coming together. 21 00:01:01,920 --> 00:01:04,720 Speaker 1: It's going to also, of course excited to be married. Yes, 22 00:01:05,200 --> 00:01:08,679 Speaker 1: of course. Well, Brian is actually the perfect co host 23 00:01:08,760 --> 00:01:12,040 Speaker 1: for this week's episode, because all we're talking about our weddings. 24 00:01:12,400 --> 00:01:14,480 Speaker 1: I spoke to David Wood, he's the president of the 25 00:01:14,520 --> 00:01:18,520 Speaker 1: Association of Bridal Consultants, and according to him, sorry, Brian, 26 00:01:18,560 --> 00:01:21,600 Speaker 1: you're not that unique. Almost two and a half million 27 00:01:21,640 --> 00:01:24,120 Speaker 1: couples get married every single year in the United States, 28 00:01:24,520 --> 00:01:26,720 Speaker 1: and the average cost of those weddings is a little 29 00:01:26,720 --> 00:01:29,760 Speaker 1: shy of thirty thou dollars, and so he estimates that 30 00:01:29,800 --> 00:01:32,560 Speaker 1: it's actually an eighty billion dollar industry. And that's that's 31 00:01:32,600 --> 00:01:35,520 Speaker 1: just ho. But Brian, I'm sure after your plus of 32 00:01:35,560 --> 00:01:38,120 Speaker 1: planning your own wedding, you're well aware of how expensive 33 00:01:38,120 --> 00:01:40,839 Speaker 1: these celebrations are. This is no news to you. Yes, 34 00:01:41,120 --> 00:01:43,640 Speaker 1: I am acutely aware of that. Um. A lot of 35 00:01:43,640 --> 00:01:46,600 Speaker 1: the reasons why weddings are so expensive, though, can sort 36 00:01:46,600 --> 00:01:49,360 Speaker 1: of really be explained by some of the economic theory 37 00:01:49,440 --> 00:01:51,360 Speaker 1: that I and I'm sure a lot of the people 38 00:01:51,400 --> 00:01:55,080 Speaker 1: listening to this podcast learned in their freshman year economics classes. 39 00:01:55,120 --> 00:01:59,680 Speaker 1: You have a range of textbook terms, price discrimination, supplied 40 00:01:59,720 --> 00:02:04,200 Speaker 1: demand and elasticity of demand, price in sensitivity, all this stuff. 41 00:02:04,240 --> 00:02:06,440 Speaker 1: And before you go any further, um, you know, for 42 00:02:06,560 --> 00:02:09,080 Speaker 1: some of those listeners who maybe a year or ten 43 00:02:09,240 --> 00:02:12,120 Speaker 1: outside of their college econ classes, we have a really 44 00:02:12,160 --> 00:02:14,840 Speaker 1: special guest to help us figure this all out. Austin 45 00:02:14,840 --> 00:02:17,399 Speaker 1: Goolsby is here with us. He's a former White House 46 00:02:17,440 --> 00:02:21,400 Speaker 1: economic advisor to President Obama and since he's been a 47 00:02:21,440 --> 00:02:25,760 Speaker 1: strategic partner at thirty two Advisors, leading their economic intelligence practice. 48 00:02:26,240 --> 00:02:28,560 Speaker 1: He's talking to us from Chicago, where he's also an 49 00:02:28,560 --> 00:02:32,360 Speaker 1: economics professor at the University of Chicago's Booth School of Business. Austin, 50 00:02:32,360 --> 00:02:34,400 Speaker 1: thanks so much for joining us. Yeah, thank you for 51 00:02:34,480 --> 00:02:36,919 Speaker 1: having me, of course, And so in addition to all 52 00:02:36,960 --> 00:02:40,120 Speaker 1: of Austin's very impressive accolades, he he's also a happily 53 00:02:40,160 --> 00:02:45,440 Speaker 1: married man. Congratulations, thank you. So he was married and 54 00:02:46,000 --> 00:02:48,080 Speaker 1: I read a little bit about this, but tell us 55 00:02:48,360 --> 00:02:51,760 Speaker 1: kind of how you learn firsthand some price discrimination and 56 00:02:51,880 --> 00:02:55,520 Speaker 1: ECON things at work when you're planning your own wedding. Well, 57 00:02:56,040 --> 00:02:59,080 Speaker 1: as anybody who's gotten married knows, planning your wedding as 58 00:02:59,120 --> 00:03:01,000 Speaker 1: a nightmare, and it's only gotten you know, I've been 59 00:03:01,040 --> 00:03:03,079 Speaker 1: married a long time. It was a nightmare then, it's 60 00:03:03,120 --> 00:03:07,480 Speaker 1: only a bigger nightmare now. And uh so we were, 61 00:03:07,919 --> 00:03:11,560 Speaker 1: you know, we were a little older, so we both 62 00:03:11,560 --> 00:03:13,520 Speaker 1: had my wife and I both had jobs, so we 63 00:03:13,520 --> 00:03:16,840 Speaker 1: were doing it on our on our own. Here. We 64 00:03:16,840 --> 00:03:19,079 Speaker 1: we had moved to Chicago, my wife from New Jersey. 65 00:03:19,200 --> 00:03:22,919 Speaker 1: So we're having the wedding here, and you know, there's 66 00:03:22,960 --> 00:03:25,919 Speaker 1: a hundred things you gotta figure out, and the chairs 67 00:03:26,080 --> 00:03:28,919 Speaker 1: and then do you want the cups to be taller 68 00:03:28,960 --> 00:03:33,440 Speaker 1: and shorter and what? And this just a thousand decisions. 69 00:03:34,160 --> 00:03:39,200 Speaker 1: We finally find the place, and it's a place the 70 00:03:39,280 --> 00:03:42,440 Speaker 1: Chicago Cultural Centers downtown. It used to be the public Library. 71 00:03:42,520 --> 00:03:45,640 Speaker 1: Is a really nice uh it's a really nice big 72 00:03:45,720 --> 00:03:48,880 Speaker 1: room and it's got a dome and it and entile 73 00:03:49,080 --> 00:03:53,440 Speaker 1: in this but it's run by the city, so it's 74 00:03:53,480 --> 00:03:56,920 Speaker 1: not it's not integrated. It doesn't come with food or whatever. 75 00:03:57,000 --> 00:04:00,360 Speaker 1: You have to arranged to have somebody coming to bring 76 00:04:00,400 --> 00:04:02,320 Speaker 1: the food and bring the chairs and bring the table. 77 00:04:02,560 --> 00:04:05,800 Speaker 1: So I'm talking to the food people and I say, 78 00:04:06,400 --> 00:04:11,080 Speaker 1: you know, there's gonna be whatever people there, and we're 79 00:04:11,080 --> 00:04:13,560 Speaker 1: gonna have these tables. We're gonna have a band and 80 00:04:13,560 --> 00:04:15,800 Speaker 1: they're like, yes, yes, And so we come to the 81 00:04:15,840 --> 00:04:17,960 Speaker 1: end and I said, uh, I said, how much is 82 00:04:17,960 --> 00:04:22,400 Speaker 1: that gonna be? And I can't remember what the orders 83 00:04:22,440 --> 00:04:23,880 Speaker 1: of man to do are, but let's say they said, 84 00:04:24,120 --> 00:04:27,880 Speaker 1: you know, but that'll be seventy dollars a person. I'm like, god, 85 00:04:28,040 --> 00:04:32,200 Speaker 1: seventy dollars a person. I say, okay, and where you know, 86 00:04:32,360 --> 00:04:35,120 Speaker 1: can we have the ceremony or you know. I said 87 00:04:35,120 --> 00:04:37,040 Speaker 1: something about the ceremony and the guy says, whoa, whoa, 88 00:04:37,040 --> 00:04:40,479 Speaker 1: wait a minute, this is a wedding And I said yes. 89 00:04:40,560 --> 00:04:43,200 Speaker 1: He's like, oh, that is a hundred forty a person. 90 00:04:43,400 --> 00:04:46,080 Speaker 1: I was like, what why But it's the same We're 91 00:04:46,120 --> 00:04:51,200 Speaker 1: in the same place. And he and that, the caterer said, 92 00:04:52,000 --> 00:04:54,239 Speaker 1: And I love it that that he said it that way. 93 00:04:54,600 --> 00:04:58,080 Speaker 1: He was like, well, people are willing to pay a 94 00:04:58,120 --> 00:05:01,600 Speaker 1: lot more if it's a wedding. He was He wasn't 95 00:05:01,600 --> 00:05:04,520 Speaker 1: even making he wasn't even pretending that there was some 96 00:05:04,680 --> 00:05:07,159 Speaker 1: other thing like oh, it's more costly and we have 97 00:05:07,240 --> 00:05:11,440 Speaker 1: to make the food better. He basically just said, um, 98 00:05:11,560 --> 00:05:14,799 Speaker 1: exactly what Brian said. People's willingness to pay is higher. 99 00:05:15,320 --> 00:05:18,960 Speaker 1: They don't want it to be best up. You know whatever, Um, 100 00:05:19,080 --> 00:05:21,200 Speaker 1: we're gonna we can get away with charging morph it's 101 00:05:21,200 --> 00:05:23,760 Speaker 1: a wedding, while Austin, that sounds like a really clear 102 00:05:23,800 --> 00:05:28,279 Speaker 1: textbook case of price discrimination totally. I was teaching micro 103 00:05:28,440 --> 00:05:31,599 Speaker 1: at the time, and so I'm teaching price discrimination. But 104 00:05:31,760 --> 00:05:34,440 Speaker 1: you were teaching microeconomics at the time that you had 105 00:05:34,480 --> 00:05:37,920 Speaker 1: to deal with price discrimination. Yes, And in fact, the 106 00:05:39,160 --> 00:05:41,520 Speaker 1: I was I had to teach on the weekend, and 107 00:05:41,560 --> 00:05:43,800 Speaker 1: I had to teach the morning of my wedding. And 108 00:05:43,800 --> 00:05:48,039 Speaker 1: there's this photo of me standing there in a tuxedo 109 00:05:48,320 --> 00:05:52,200 Speaker 1: teaching class. I finished the class, I go down and 110 00:05:52,240 --> 00:05:55,760 Speaker 1: I and I get married. And the day of that 111 00:05:55,880 --> 00:06:00,120 Speaker 1: class was the monopoly markup formula for anybody who's who 112 00:06:00,160 --> 00:06:03,360 Speaker 1: was into micro which is basically the center of all 113 00:06:03,400 --> 00:06:07,360 Speaker 1: price discrimination, it says, here's the formula you use once 114 00:06:07,400 --> 00:06:10,680 Speaker 1: you know how sensitive the customer is, here's how you 115 00:06:10,760 --> 00:06:13,600 Speaker 1: jack up the price on them, which is virtually exactly 116 00:06:13,600 --> 00:06:17,080 Speaker 1: what happened to you. Yep, that's just incredible, I mean, 117 00:06:17,240 --> 00:06:18,919 Speaker 1: and I think that's what kind of Brian and I 118 00:06:19,520 --> 00:06:21,560 Speaker 1: what we were so attracted to you about this show 119 00:06:21,680 --> 00:06:24,760 Speaker 1: is because so many things that happen in weddings can 120 00:06:24,760 --> 00:06:28,160 Speaker 1: be explained by these I mean econ one oh one 121 00:06:28,720 --> 00:06:32,159 Speaker 1: series and principles like price discrimination like what you're talking about. 122 00:06:32,520 --> 00:06:34,800 Speaker 1: But I think what's really interesting in Brian like kind 123 00:06:34,800 --> 00:06:37,520 Speaker 1: of talking. I mean, it's not that way in all markets. 124 00:06:37,600 --> 00:06:40,159 Speaker 1: It's and weddings are unique, right, I think there's definitely 125 00:06:40,160 --> 00:06:44,559 Speaker 1: an information gap between the buyers and sellers of various uh, 126 00:06:44,600 --> 00:06:48,520 Speaker 1: you know, wedding needs. Um you've got like flowers for example. 127 00:06:48,640 --> 00:06:51,440 Speaker 1: I mean, the people who are selling you flowers certainly 128 00:06:51,480 --> 00:06:54,760 Speaker 1: know the prices and certainly know how available the supply 129 00:06:54,839 --> 00:06:57,400 Speaker 1: of flowers is. And you, as a seller, you're coming 130 00:06:57,400 --> 00:07:00,640 Speaker 1: in and you're buying you know, thousands of dollars worth 131 00:07:00,680 --> 00:07:03,279 Speaker 1: of flowers for the first time to populate your venue, 132 00:07:03,279 --> 00:07:06,320 Speaker 1: and you just don't know how much each costs. And 133 00:07:06,440 --> 00:07:10,160 Speaker 1: you can't go item by item and comparison shop in 134 00:07:10,280 --> 00:07:13,000 Speaker 1: any sort of timely manner in Austin. Help us out here, 135 00:07:13,040 --> 00:07:16,680 Speaker 1: help us bridge the gaps. So typically post Internet, we've 136 00:07:16,680 --> 00:07:19,680 Speaker 1: been dealing with mostly transparent markets. I'm thinking of like 137 00:07:19,720 --> 00:07:22,120 Speaker 1: the airlines and now you have Kayak, you have orbits. 138 00:07:22,160 --> 00:07:24,480 Speaker 1: I mean, and even for you know, market markets, so 139 00:07:24,800 --> 00:07:27,800 Speaker 1: I mean fixed income our own company, Bloomberg pretty much 140 00:07:28,080 --> 00:07:31,440 Speaker 1: created the transparency to that market, but it's not the 141 00:07:31,480 --> 00:07:33,320 Speaker 1: same way in weddings. Can you kind of help us 142 00:07:33,440 --> 00:07:38,280 Speaker 1: frame how important transparency is for efficient markets? Well, I 143 00:07:38,280 --> 00:07:40,520 Speaker 1: guess I would walk it through in a couple of ways. 144 00:07:41,520 --> 00:07:46,000 Speaker 1: With any brice discrimination, what information you have about the 145 00:07:46,080 --> 00:07:49,520 Speaker 1: customers and their willingness to pay is one huge element. 146 00:07:50,000 --> 00:07:53,360 Speaker 1: And the second is you have to have the ability 147 00:07:53,440 --> 00:07:59,680 Speaker 1: to prevent people from arbitraging or reselling the thing somewhere else. 148 00:07:59,720 --> 00:08:05,040 Speaker 1: So if I can go buy a million tickets to 149 00:08:05,160 --> 00:08:08,280 Speaker 1: the movies at the student discounted price and then just 150 00:08:08,320 --> 00:08:11,720 Speaker 1: turn around and resell them to non students, you you 151 00:08:11,760 --> 00:08:14,840 Speaker 1: won't be able to get away with price discrimination. I 152 00:08:14,880 --> 00:08:21,800 Speaker 1: think part of what happens with transparency online is you've 153 00:08:21,800 --> 00:08:28,280 Speaker 1: got multiple sellers. Once you get into transparent market, everybody's 154 00:08:28,280 --> 00:08:32,079 Speaker 1: trying to undercut each other to steal the business. If 155 00:08:32,120 --> 00:08:35,360 Speaker 1: you live so my parents live in Abilene, Texas, they're 156 00:08:35,360 --> 00:08:40,840 Speaker 1: retired there. There's only one carrier that flies to Abilene, Texas. 157 00:08:40,920 --> 00:08:45,439 Speaker 1: It's American Airlines. So you can have kayak, you can 158 00:08:45,480 --> 00:08:48,640 Speaker 1: have orbits, you can have whatever you want. The fact is, 159 00:08:48,840 --> 00:08:52,560 Speaker 1: when you're flying to Abilene, you're gonna pay because American 160 00:08:52,559 --> 00:08:55,440 Speaker 1: Airlines they can be transparent, but they can charge you 161 00:08:55,480 --> 00:08:57,880 Speaker 1: a lot because they know if you're flying to Abilene, 162 00:08:57,960 --> 00:09:00,880 Speaker 1: you're not really going to have that many substitutes. The 163 00:09:00,960 --> 00:09:04,160 Speaker 1: substitute is get off in Dallas and go rent a 164 00:09:04,240 --> 00:09:07,319 Speaker 1: car and drive for four hours to get to my parents. 165 00:09:07,360 --> 00:09:11,800 Speaker 1: That happens with weddings. Okay, so Brian's right. They know 166 00:09:11,920 --> 00:09:15,160 Speaker 1: more about the flowers, they know more about what's rare. 167 00:09:15,520 --> 00:09:19,880 Speaker 1: They've got a package deal of a whole bunch of things, 168 00:09:19,880 --> 00:09:23,319 Speaker 1: and you can't find one. You can't separate out how 169 00:09:23,400 --> 00:09:26,760 Speaker 1: much are the ballroom chairs versus the folding chairs versus 170 00:09:26,760 --> 00:09:28,640 Speaker 1: the whatever. I mean, I guess you can. But there's 171 00:09:28,679 --> 00:09:32,640 Speaker 1: just a hundred things that you would pay money to 172 00:09:32,800 --> 00:09:36,680 Speaker 1: just not have the decide. And then you get the third, 173 00:09:37,440 --> 00:09:41,600 Speaker 1: which is whether it's because of the scale, whether it's 174 00:09:41,640 --> 00:09:46,120 Speaker 1: because there's only a limited number of vendors who want 175 00:09:46,120 --> 00:09:50,160 Speaker 1: to deal with the pressure of a wedding. But it's 176 00:09:50,240 --> 00:09:53,400 Speaker 1: hard to get a lot of competition. It's hard to 177 00:09:53,400 --> 00:09:59,079 Speaker 1: induce an auction for wedding photographers. There is no kayak 178 00:10:00,000 --> 00:10:02,880 Speaker 1: available of I'm going to go on here and figure 179 00:10:02,920 --> 00:10:06,239 Speaker 1: out if somebody will somebody will bring in the alcohol 180 00:10:06,880 --> 00:10:09,920 Speaker 1: separate from the food at a lower price. They lists 181 00:10:10,000 --> 00:10:12,600 Speaker 1: largely don't do that. And I think the bigger question 182 00:10:13,320 --> 00:10:16,960 Speaker 1: is why isn't there more entry into what seems like 183 00:10:17,720 --> 00:10:22,160 Speaker 1: very profitable economics of these wedding businesses. How how are 184 00:10:22,160 --> 00:10:26,120 Speaker 1: they not How are people not falling over themselves trying 185 00:10:26,120 --> 00:10:29,200 Speaker 1: to drive the prices down to more competitive levels. And 186 00:10:29,200 --> 00:10:31,400 Speaker 1: I don't really know the answer to that. Well, maybe 187 00:10:31,400 --> 00:10:33,760 Speaker 1: I can help you out because I was speaking to 188 00:10:33,840 --> 00:10:36,920 Speaker 1: the president of kind of the Trade, the leading trade 189 00:10:37,000 --> 00:10:39,880 Speaker 1: organization for wedding vendors, David Wood, and he was telling 190 00:10:39,880 --> 00:10:41,520 Speaker 1: me that a lot of the reason why that happens 191 00:10:41,640 --> 00:10:46,200 Speaker 1: because the market is so fragmented and is so decidedly local. So, 192 00:10:46,280 --> 00:10:49,880 Speaker 1: for example, for flowers, you're probably going to be going 193 00:10:49,920 --> 00:10:52,920 Speaker 1: with a local forest because you can't ship in flowers 194 00:10:52,920 --> 00:10:55,840 Speaker 1: from somewhere else. Right, locality is very important, and same 195 00:10:55,880 --> 00:10:58,559 Speaker 1: with venues, right like their mother very nature, they can 196 00:10:58,600 --> 00:11:01,560 Speaker 1: only be in in certain places. He was saying that 197 00:11:01,679 --> 00:11:05,880 Speaker 1: because because of the kind of fragmented and highly local 198 00:11:06,360 --> 00:11:09,440 Speaker 1: nature of the market, it's hard to kind of even 199 00:11:09,440 --> 00:11:11,679 Speaker 1: though it is right for disruption and I am so 200 00:11:11,720 --> 00:11:15,200 Speaker 1: sorry I just use that word. But even though it is, 201 00:11:15,320 --> 00:11:17,280 Speaker 1: it hasn't been able to happen because of that. But 202 00:11:17,320 --> 00:11:19,640 Speaker 1: I think the other thing I mean, Brian, I mean, 203 00:11:19,800 --> 00:11:23,400 Speaker 1: tell me about Emily's preferences. How, I mean, how strong 204 00:11:23,480 --> 00:11:25,880 Speaker 1: have her preference has been, because that's the other aspect, 205 00:11:26,040 --> 00:11:28,600 Speaker 1: like if you want something, you want something and you 206 00:11:28,640 --> 00:11:30,840 Speaker 1: don't care how much it costs. So Brian, kind of 207 00:11:30,880 --> 00:11:33,840 Speaker 1: how what's your experience been with that, not just her preferences, 208 00:11:33,920 --> 00:11:36,880 Speaker 1: my preferences to it's your both day, not just heard it. Well, 209 00:11:37,240 --> 00:11:39,560 Speaker 1: I think it's really interesting. That's what Austin brings up 210 00:11:39,559 --> 00:11:42,120 Speaker 1: about sort of being able to resell movie tickets or 211 00:11:42,160 --> 00:11:45,840 Speaker 1: whether it's a kayak for wedding photographers. It's just it 212 00:11:45,920 --> 00:11:51,000 Speaker 1: just does not seem feasible because it's so intensely personal. Um, 213 00:11:51,480 --> 00:11:55,280 Speaker 1: you can't just go online and figure out how comfortable 214 00:11:55,320 --> 00:11:57,839 Speaker 1: you are in front of your photographer or your videographer. 215 00:11:57,880 --> 00:11:59,360 Speaker 1: You want to meet with them, you want to speak 216 00:11:59,400 --> 00:12:01,960 Speaker 1: with them, you want to hear their experiences, and you 217 00:12:01,960 --> 00:12:04,280 Speaker 1: want to feel like if they reflect what you want 218 00:12:04,280 --> 00:12:06,960 Speaker 1: to get out of the day. So I think it's 219 00:12:07,040 --> 00:12:09,640 Speaker 1: really tough and I'm I'm just wondering maybe Austin you 220 00:12:09,679 --> 00:12:12,880 Speaker 1: can talk a little bit about how how strong preferences 221 00:12:12,960 --> 00:12:18,400 Speaker 1: and having having that on on the bye side um affects, uh, 222 00:12:18,440 --> 00:12:21,320 Speaker 1: you know, price and insensitivity and how they're able to 223 00:12:21,720 --> 00:12:24,560 Speaker 1: market prices. From a ventor point of view, I think 224 00:12:24,559 --> 00:12:28,160 Speaker 1: it does matter, and sort of the one way to 225 00:12:28,200 --> 00:12:32,640 Speaker 1: think of it is there are some products like like sushi, 226 00:12:32,640 --> 00:12:37,000 Speaker 1: like brain surgery and others which just the fact that 227 00:12:37,040 --> 00:12:39,160 Speaker 1: somebody comes in and says, well, i'll give you the 228 00:12:39,240 --> 00:12:42,560 Speaker 1: same thing for half price does not induce a whole 229 00:12:42,559 --> 00:12:44,719 Speaker 1: bunch of demand to switch to them, you know, the 230 00:12:44,880 --> 00:12:48,560 Speaker 1: half price sushi, half price brain certain you're thinking like 231 00:12:48,640 --> 00:12:51,320 Speaker 1: whoa wait a minute, The quality makes a big difference. 232 00:12:51,760 --> 00:12:55,160 Speaker 1: And I do think some element of that that that's 233 00:12:55,200 --> 00:13:00,480 Speaker 1: correlated with what how strong are people's preferences, and that 234 00:13:00,720 --> 00:13:04,360 Speaker 1: has a strong bearing in weddings because if you if 235 00:13:04,440 --> 00:13:07,760 Speaker 1: you I don't know, I don't know your wife, you know, 236 00:13:07,800 --> 00:13:11,520 Speaker 1: but if you go to say, hey, honey, great, great news. 237 00:13:12,200 --> 00:13:15,760 Speaker 1: I've got a florist who says that they're willing to 238 00:13:15,840 --> 00:13:19,000 Speaker 1: do everything you said you wanted in flowers, but for 239 00:13:19,160 --> 00:13:22,480 Speaker 1: one third the price, and they're gonna bring the flowers 240 00:13:22,520 --> 00:13:24,959 Speaker 1: over here from West Virginia. You know we're gonna we're 241 00:13:24,960 --> 00:13:27,480 Speaker 1: gonna bring it in from a market that's a lot cheaper. 242 00:13:28,080 --> 00:13:31,160 Speaker 1: There are gonna be people who say, who say, in 243 00:13:31,240 --> 00:13:35,160 Speaker 1: your family, this may be remembered as the Brian incident, 244 00:13:35,480 --> 00:13:37,960 Speaker 1: and you may hear about that for the next forty years. 245 00:13:39,559 --> 00:13:41,600 Speaker 1: That that's a great way actually, And it's I think 246 00:13:41,640 --> 00:13:43,720 Speaker 1: it's interesting you bring up the medical thing too, and 247 00:13:43,800 --> 00:13:46,440 Speaker 1: like you know, half off isn't always great. I mean, 248 00:13:46,480 --> 00:13:48,040 Speaker 1: that's I mean, that's a huge thing. There's a lot. 249 00:13:48,040 --> 00:13:50,480 Speaker 1: I mean, there's an economic principle. It's the names escaping 250 00:13:50,520 --> 00:13:53,360 Speaker 1: me right now. But the idea is the more something costs, 251 00:13:53,400 --> 00:13:55,360 Speaker 1: the more you want it. What is the superior versus 252 00:13:55,400 --> 00:13:58,840 Speaker 1: inferior goods? Well, it sounds like signaling, you know, we 253 00:13:58,840 --> 00:14:02,600 Speaker 1: we've got a thing of of any any time when 254 00:14:02,640 --> 00:14:07,400 Speaker 1: there's not just uniform products, let's let's call it that way. 255 00:14:07,440 --> 00:14:12,560 Speaker 1: They're not just homogeneous. There are quality lad there's there's 256 00:14:12,600 --> 00:14:18,480 Speaker 1: both what the economists called horizontal differentiation of slightly all 257 00:14:18,480 --> 00:14:21,080 Speaker 1: the goods are slightly different from each other, but also 258 00:14:21,240 --> 00:14:24,400 Speaker 1: vertical some of them are just better than others. And 259 00:14:24,440 --> 00:14:27,840 Speaker 1: we can all agree. Let's say that you know, the 260 00:14:28,320 --> 00:14:31,640 Speaker 1: burritos at Chipotle are better than a taco bell that 261 00:14:31,720 --> 00:14:34,600 Speaker 1: are better than a del Taco you know whatever. If 262 00:14:34,600 --> 00:14:39,200 Speaker 1: you have some ordering of quality, um, and people have 263 00:14:39,280 --> 00:14:44,440 Speaker 1: a taste for quality, then it's gonna make the normal 264 00:14:44,600 --> 00:14:47,160 Speaker 1: rules of the market. It's not that they don't apply, 265 00:14:47,280 --> 00:14:50,320 Speaker 1: it's just that they get more complicated. And you can 266 00:14:50,400 --> 00:14:56,120 Speaker 1: have situations where in an intensely local market where there's 267 00:14:56,160 --> 00:14:59,240 Speaker 1: a high taste for quality and hopefully you're only doing 268 00:14:59,280 --> 00:15:04,040 Speaker 1: this once and it's a big budget thing that you 269 00:15:04,240 --> 00:15:07,880 Speaker 1: just want to make sure that like in the old 270 00:15:08,000 --> 00:15:10,440 Speaker 1: days they used to say, nobody ever got fired for 271 00:15:10,520 --> 00:15:14,840 Speaker 1: buying an IBM. You know, yes it costs more to 272 00:15:15,040 --> 00:15:19,520 Speaker 1: go with the well known caterer, but you know it's 273 00:15:19,520 --> 00:15:22,640 Speaker 1: not going to be screwed up, and that your mother 274 00:15:22,720 --> 00:15:26,040 Speaker 1: in law is not gonna hold against you. You know 275 00:15:26,160 --> 00:15:30,120 Speaker 1: that he saved us five hundred dollars and he got 276 00:15:30,200 --> 00:15:32,800 Speaker 1: us a thing that went horribly wrung right at a 277 00:15:32,800 --> 00:15:34,600 Speaker 1: certain point is just not even worth it, which I 278 00:15:34,600 --> 00:15:37,720 Speaker 1: mean I think you know, throwing out somewhere you know 279 00:15:37,840 --> 00:15:41,520 Speaker 1: econ buzzwords. I mean, that's a lot of demanded elasticity too. 280 00:15:41,560 --> 00:15:44,400 Speaker 1: I mean, I'm thinking, like the Plaza Hotel, doesn't matter 281 00:15:44,440 --> 00:15:46,880 Speaker 1: how much the Plaza Hotel costs. There's always going to 282 00:15:46,920 --> 00:15:50,120 Speaker 1: be someone who's going willing to pay the venue price 283 00:15:50,200 --> 00:15:52,160 Speaker 1: to have their winning at the Plaza Hotel in New York. 284 00:15:52,160 --> 00:15:55,360 Speaker 1: It doesn't really matter like the I mean, the amount 285 00:15:55,400 --> 00:15:58,040 Speaker 1: that they I mean, this is just the principle last Disney. Right, 286 00:15:58,120 --> 00:16:00,560 Speaker 1: the amount that they raised that venue price buy is 287 00:16:00,680 --> 00:16:03,240 Speaker 1: going to have a very different effect of how many 288 00:16:03,240 --> 00:16:07,200 Speaker 1: people are become unwilling to buy it. Right. That is true, 289 00:16:07,520 --> 00:16:13,400 Speaker 1: though there's a there's a somewhat non intuitive result. It 290 00:16:13,480 --> 00:16:18,280 Speaker 1: comes out of the theory which says, anybody who has 291 00:16:18,440 --> 00:16:23,000 Speaker 1: market power shouldn't already know that, and they should have 292 00:16:23,200 --> 00:16:28,320 Speaker 1: already raised the prices up so high that actually their 293 00:16:28,480 --> 00:16:33,480 Speaker 1: customers are price sensitive, because if they weren't, if if 294 00:16:33,520 --> 00:16:39,160 Speaker 1: the Plaza hotels customers were as price insensitive as you're describing, 295 00:16:39,440 --> 00:16:42,240 Speaker 1: then they already should have raised the price even more 296 00:16:42,480 --> 00:16:45,840 Speaker 1: and just keep on raising it until even the shake 297 00:16:45,960 --> 00:16:49,840 Speaker 1: of whatever it says, my god, the plaza cast that money. 298 00:16:49,880 --> 00:16:53,800 Speaker 1: If you're not gonna pay one cent more. So, I 299 00:16:53,840 --> 00:16:57,920 Speaker 1: think the basic question of what is a what makes 300 00:16:58,600 --> 00:17:04,480 Speaker 1: a good more price sensitive have a higher demand. Elasticity 301 00:17:04,840 --> 00:17:07,239 Speaker 1: is kind of the same thing as well. What are 302 00:17:07,240 --> 00:17:14,080 Speaker 1: the substitutes? And to the extent that a flower supplier 303 00:17:14,400 --> 00:17:18,320 Speaker 1: from some other market that's far away is not a substitute, 304 00:17:18,960 --> 00:17:23,000 Speaker 1: then that's gonna tend to make the buyers less price sensitive. 305 00:17:23,560 --> 00:17:26,399 Speaker 1: To the extent that there are big quality differences, that 306 00:17:26,480 --> 00:17:31,960 Speaker 1: the Plaza hotel is something higher class than the best 307 00:17:32,040 --> 00:17:36,440 Speaker 1: Western that's gonna make the that's gonna make the elasticity 308 00:17:36,520 --> 00:17:41,159 Speaker 1: is different. And the essence of price discrimination, if you 309 00:17:41,280 --> 00:17:44,800 Speaker 1: just say from the back to the to the brass 310 00:17:44,920 --> 00:17:49,760 Speaker 1: tax economic theory is you've got to be able to 311 00:17:49,800 --> 00:17:52,520 Speaker 1: figure out who's more or less price sensitive, and you've 312 00:17:52,520 --> 00:17:56,040 Speaker 1: got to be able to prevent them from You gotta 313 00:17:56,119 --> 00:17:59,520 Speaker 1: know who who is more price sensitive, you gotta be 314 00:17:59,600 --> 00:18:04,440 Speaker 1: able to to identify and charge them, and you've got 315 00:18:04,440 --> 00:18:07,640 Speaker 1: to be able to prevent them from reselling to others. 316 00:18:07,720 --> 00:18:13,480 Speaker 1: And in most of those cases the normal problems that 317 00:18:13,480 --> 00:18:17,240 Speaker 1: that people face. So take the airlines, their price discriminating, 318 00:18:17,560 --> 00:18:21,240 Speaker 1: but they have the problem of trying to figure out 319 00:18:21,560 --> 00:18:25,399 Speaker 1: who are they know there are some not sensitive to 320 00:18:25,560 --> 00:18:29,200 Speaker 1: price customers, but they don't know who they are just 321 00:18:29,320 --> 00:18:33,240 Speaker 1: from calling up. They know that their business people. But 322 00:18:33,359 --> 00:18:36,199 Speaker 1: they if you call and you're a business person and 323 00:18:36,320 --> 00:18:39,639 Speaker 1: you use a lot of hey, dude, you know, and 324 00:18:39,720 --> 00:18:42,000 Speaker 1: you try to sound like a student and dress like 325 00:18:42,040 --> 00:18:45,000 Speaker 1: a student, uh, so that you would get a lower price, 326 00:18:45,240 --> 00:18:48,439 Speaker 1: they have to design the product to force you to 327 00:18:48,520 --> 00:18:51,119 Speaker 1: stay a Saturday, to force you to have a long 328 00:18:51,760 --> 00:18:55,440 Speaker 1: um buy it well in advance. All of those are 329 00:18:55,600 --> 00:18:58,320 Speaker 1: just things that they're using to try to get you 330 00:18:58,400 --> 00:19:04,200 Speaker 1: to separate yourself yourselves into the types of customers you are. 331 00:19:05,200 --> 00:19:08,879 Speaker 1: People who supply weddings don't have to do that because 332 00:19:09,440 --> 00:19:14,680 Speaker 1: they know wedding customers are less price sensitive and they 333 00:19:14,800 --> 00:19:18,440 Speaker 1: know you're getting married. Hence the guy with the with 334 00:19:18,480 --> 00:19:22,280 Speaker 1: the chicken dinners. For me, my goal, as I said 335 00:19:22,320 --> 00:19:24,480 Speaker 1: to my wife, I said, my goal on the food 336 00:19:24,600 --> 00:19:29,440 Speaker 1: is I don't want anyone to remember the food at 337 00:19:29,480 --> 00:19:33,560 Speaker 1: our wedding in any way not good and not bad, 338 00:19:33,840 --> 00:19:36,280 Speaker 1: because if they remembered him like that was the best 339 00:19:36,320 --> 00:19:39,679 Speaker 1: food I ever had, too much, way too much, and 340 00:19:39,720 --> 00:19:42,640 Speaker 1: if they remember it was like that was horrible. I 341 00:19:42,680 --> 00:19:46,639 Speaker 1: didn't want that. But just some middle ground would be 342 00:19:46,680 --> 00:19:50,240 Speaker 1: totally fine. So I'm not going to get Boston Market 343 00:19:50,280 --> 00:19:53,320 Speaker 1: to cater the wedding. But you know, as long as 344 00:19:53,359 --> 00:19:56,800 Speaker 1: it was of acceptable quality. But as soon as the 345 00:19:56,840 --> 00:20:00,359 Speaker 1: guy heard that it was for a wedding, he was like, 346 00:20:00,480 --> 00:20:03,080 Speaker 1: you just solved my problem because you just tell me 347 00:20:03,280 --> 00:20:07,639 Speaker 1: that you are not price sensitive, so price is higher. Okay. 348 00:20:07,640 --> 00:20:11,680 Speaker 1: So Austin, one last question. Two of your students their 349 00:20:11,880 --> 00:20:14,639 Speaker 1: PhD and this is hypothetical. Two of your students. So 350 00:20:15,240 --> 00:20:17,760 Speaker 1: I was like, who know, these are just hypothetical students 351 00:20:18,240 --> 00:20:21,679 Speaker 1: economics PhDs. And they go to you and they're saying 352 00:20:21,720 --> 00:20:23,920 Speaker 1: that we want to avoid all these traps. We want 353 00:20:23,920 --> 00:20:26,359 Speaker 1: to have the most price efficient wedding. How do you 354 00:20:26,400 --> 00:20:28,800 Speaker 1: do it? Let's let's make this actionable. Oh I think 355 00:20:28,840 --> 00:20:30,680 Speaker 1: we're gonna say, do you tell them not to get 356 00:20:30,680 --> 00:20:37,679 Speaker 1: married on a positive note? Um? Okay, so how you 357 00:20:37,800 --> 00:20:42,440 Speaker 1: do it? Look, the secrets of price discrimination to the 358 00:20:42,480 --> 00:20:47,840 Speaker 1: merchant are they have more information than you have. They 359 00:20:47,960 --> 00:20:50,439 Speaker 1: know how price sensitive you are, and they're trying to 360 00:20:50,480 --> 00:20:56,480 Speaker 1: prevent you from doing uh resale and prevent the cross shopping. 361 00:20:57,080 --> 00:21:00,280 Speaker 1: So you try to beat them on every on every 362 00:21:00,320 --> 00:21:05,320 Speaker 1: measure one you leave them like scratching their head. Wait, 363 00:21:05,400 --> 00:21:08,160 Speaker 1: are these people who want a fancy wedding or not, 364 00:21:08,520 --> 00:21:10,800 Speaker 1: you know. So so you drop things, You're like, yes, 365 00:21:11,160 --> 00:21:14,480 Speaker 1: we want that, and you know, the the groom to 366 00:21:14,640 --> 00:21:17,840 Speaker 1: be says, uh, we want we want fine China. And 367 00:21:17,880 --> 00:21:20,000 Speaker 1: then in their mind they're like, ah, so this is 368 00:21:20,040 --> 00:21:22,600 Speaker 1: gonna be expensive wedding. But then you plan it and 369 00:21:22,640 --> 00:21:26,040 Speaker 1: you say like, do you think we should um do 370 00:21:26,080 --> 00:21:30,200 Speaker 1: you think we should have free gum as, the as, 371 00:21:30,240 --> 00:21:32,960 Speaker 1: the as, the departure present, you know, at the wedding, 372 00:21:33,080 --> 00:21:35,159 Speaker 1: And so the first is like, wait, what you know? 373 00:21:35,240 --> 00:21:37,800 Speaker 1: And so one of you is wearing something that's like 374 00:21:38,359 --> 00:21:41,400 Speaker 1: ripped and really kick pull up in a car that's dented, 375 00:21:41,520 --> 00:21:44,280 Speaker 1: you know, so they don't know what to make of you. 376 00:21:45,040 --> 00:21:48,000 Speaker 1: Are you a person who's what they want? If they 377 00:21:48,040 --> 00:21:51,560 Speaker 1: conclude you're a person who wants only the finest, then 378 00:21:51,640 --> 00:21:55,000 Speaker 1: you're gonna be Mr Markup or Miss mark Up to them. 379 00:21:55,119 --> 00:21:57,480 Speaker 1: They're gonna jack up the price of everything. So you 380 00:21:57,480 --> 00:22:00,280 Speaker 1: want them to think you don't have as much money 381 00:22:00,600 --> 00:22:06,040 Speaker 1: um as as they originally thought to shop around as 382 00:22:06,119 --> 00:22:11,000 Speaker 1: much as you can. Every additional bid you get is 383 00:22:11,040 --> 00:22:14,160 Speaker 1: gonna just make you that much more informed and that 384 00:22:14,240 --> 00:22:18,879 Speaker 1: much better able to play off against them on No wait, 385 00:22:18,920 --> 00:22:21,920 Speaker 1: a second. You know you're gonna charge me a hundred 386 00:22:21,920 --> 00:22:25,640 Speaker 1: dollars a person for the food, but I can get 387 00:22:25,640 --> 00:22:28,160 Speaker 1: the same thing for these other guys for seventy five. 388 00:22:28,240 --> 00:22:31,679 Speaker 1: You know you forced them to compete because competition destroys 389 00:22:31,720 --> 00:22:35,720 Speaker 1: their ability to price discriminate. And if you can, you 390 00:22:35,840 --> 00:22:39,520 Speaker 1: find some some opportunity for resale. You know you you 391 00:22:39,640 --> 00:22:43,520 Speaker 1: got you got left over wine bottles or something. You 392 00:22:43,760 --> 00:22:48,359 Speaker 1: friends getting merry, you hand them the wine here, you know. 393 00:22:48,840 --> 00:22:52,520 Speaker 1: So So I think basically the theory says you just 394 00:22:53,280 --> 00:22:56,960 Speaker 1: you gotta try to and I guess it also says 395 00:22:57,040 --> 00:23:00,560 Speaker 1: if you can help it. Normally, the economists take your 396 00:23:00,600 --> 00:23:04,080 Speaker 1: demand as given. They have no input on how bad 397 00:23:04,160 --> 00:23:08,879 Speaker 1: you want something. Um. They then just go from given that, 398 00:23:08,960 --> 00:23:11,400 Speaker 1: here's how bad you want it, here's how to try 399 00:23:11,400 --> 00:23:14,960 Speaker 1: to get more competition, to make the market blower. As 400 00:23:15,040 --> 00:23:18,880 Speaker 1: your friend, I would tell you, try to not have 401 00:23:18,960 --> 00:23:21,880 Speaker 1: anything you want so bad that you're like, I will 402 00:23:21,920 --> 00:23:25,960 Speaker 1: pay any price to make sure that we have a 403 00:23:26,000 --> 00:23:29,359 Speaker 1: band that does blah. I will make sure we must 404 00:23:29,520 --> 00:23:33,480 Speaker 1: have orchids. If it's not orchids, you know, I'd rather 405 00:23:33,560 --> 00:23:37,200 Speaker 1: get married next year. Anything that you really care about, 406 00:23:37,760 --> 00:23:41,320 Speaker 1: These guys are excellent at figuring that out and charging 407 00:23:41,359 --> 00:23:45,800 Speaker 1: you for it. So so reveal nothing got it, Talk 408 00:23:45,920 --> 00:23:50,720 Speaker 1: only to your spouse. Don't ever identify anything in front 409 00:23:50,760 --> 00:23:53,960 Speaker 1: of the merchants. Thanks for the Austin. I gotta say 410 00:23:54,000 --> 00:23:56,520 Speaker 1: I shopped around I think a fair amount, but I'm 411 00:23:56,560 --> 00:23:59,840 Speaker 1: not sure that I went sort of full incognito with 412 00:23:59,240 --> 00:24:04,960 Speaker 1: the half rags half riches perspective like you brought up there. Um, 413 00:24:05,800 --> 00:24:08,200 Speaker 1: I guess. I guess the moral of the story is 414 00:24:08,400 --> 00:24:12,400 Speaker 1: that you know, weddings, even though they're a big business 415 00:24:12,640 --> 00:24:14,840 Speaker 1: and they're all over the place and they happen all 416 00:24:14,840 --> 00:24:17,320 Speaker 1: the time, they sort of defied the rules that we 417 00:24:17,359 --> 00:24:20,480 Speaker 1: all learned on the first day of a Yukon class, 418 00:24:20,480 --> 00:24:23,959 Speaker 1: which is that people tend to make rational decisions. The 419 00:24:23,960 --> 00:24:28,560 Speaker 1: cost benefit analysis UH sewed quite a bit when it 420 00:24:28,600 --> 00:24:31,679 Speaker 1: comes to uh these hopefully once in a lifetime events. 421 00:24:31,960 --> 00:24:36,880 Speaker 1: I guess love truly makes people irrational. Indeed. Well well, Austin, 422 00:24:36,920 --> 00:24:39,280 Speaker 1: thank you so much for joining us and giving us 423 00:24:39,320 --> 00:24:41,680 Speaker 1: some tips on how to have a cost efficient wedding, 424 00:24:41,680 --> 00:24:44,840 Speaker 1: and really appreciate it. Um and Brian, thank you as 425 00:24:44,840 --> 00:24:47,000 Speaker 1: well for kind of giving us some of your experiences 426 00:24:47,000 --> 00:24:49,760 Speaker 1: and joining us here. In the studio. Thank good luck, Brian, 427 00:24:50,960 --> 00:25:01,360 Speaker 1: it's a great future ahead of you. Appreciate Austin. Yeah, well, 428 00:25:01,400 --> 00:25:03,760 Speaker 1: Benchmark will be back next week, but until then, you 429 00:25:03,760 --> 00:25:07,320 Speaker 1: can find us on the Bloomberg terminal, Bloomberg dot com, iTunes, 430 00:25:07,480 --> 00:25:10,720 Speaker 1: pocket Cast, and Stitcher. While you're there, take a minute 431 00:25:10,760 --> 00:25:12,760 Speaker 1: to rate and review the show so that more listeners 432 00:25:12,760 --> 00:25:15,080 Speaker 1: can find us and let us know what you think 433 00:25:15,119 --> 00:25:17,280 Speaker 1: of the show. You can talk to us and follow 434 00:25:17,359 --> 00:25:20,520 Speaker 1: us on Twitter at beach Patta and by Kate Smith, 435 00:25:20,760 --> 00:25:23,159 Speaker 1: and you have to follow Austin as well his Twitter. 436 00:25:23,640 --> 00:25:26,399 Speaker 1: His Twitter account is great. Check him out at at 437 00:25:26,440 --> 00:25:29,840 Speaker 1: Austin Underscore Cool Spain. Thanks for joining us and we'll 438 00:25:29,880 --> 00:25:42,720 Speaker 1: see you next week.