WEBVTT - 53: Why Are Weddings So Expensive? Blame Econ 101. 0:00:00.400 --> 0:00:03.240 Am I god, seventy dollars a person. I say, okay, 0:00:03.440 --> 0:00:07.360 and where you know, can we have the ceremony or 0:00:07.600 --> 0:00:09.159 you know. I said something about the ceremony and the 0:00:09.200 --> 0:00:11.799 guy says, whoa, whoa, wait a minute, this is a 0:00:11.800 --> 0:00:14.560 wedding and I said yes, He's like, oh, that is 0:00:14.600 --> 0:00:26.200 a hundred person. Hi, and welcome back to Bloomberg Benchmark, 0:00:26.280 --> 0:00:29.160 I show about the global economy. It's Thursday, September one, 0:00:29.240 --> 0:00:31.520 and I'm Keith Smith, an editor for Bloomberg News here 0:00:31.520 --> 0:00:34.080 in New York. Dan Scott couldn't join us this week, 0:00:34.120 --> 0:00:36.919 so instead I'm joined by a guest host, Brian Shapada, 0:00:37.000 --> 0:00:39.600 a government bonds reporter here in New York as well. Brian, 0:00:39.640 --> 0:00:42.200 thanks for joining us. Thanks for having mckate So. Brian 0:00:42.400 --> 0:00:44.680 is has been very busy for the past couple of 0:00:44.680 --> 0:00:47.040 weeks because he is planning a wedding for a few 0:00:47.040 --> 0:00:49.640 saturdays from now right in addition to the crazy times 0:00:49.640 --> 0:00:52.720 and treasuries and watching the Fed. Yes, planning our wedding 0:00:52.760 --> 0:00:54.360 for about three and a half weeks from now. And 0:00:54.360 --> 0:00:56.080 how long have you been planning that wedding for a 0:00:56.080 --> 0:00:58.920 little over a year and are you excited to see 0:00:58.920 --> 0:01:01.880 the planning come to an I'm psyched it's all coming together. 0:01:01.920 --> 0:01:04.720 It's going to also, of course excited to be married. Yes, 0:01:05.200 --> 0:01:08.679 of course. Well, Brian is actually the perfect co host 0:01:08.760 --> 0:01:12.040 for this week's episode, because all we're talking about our weddings. 0:01:12.400 --> 0:01:14.480 I spoke to David Wood, he's the president of the 0:01:14.520 --> 0:01:18.520 Association of Bridal Consultants, and according to him, sorry, Brian, 0:01:18.560 --> 0:01:21.600 you're not that unique. Almost two and a half million 0:01:21.640 --> 0:01:24.120 couples get married every single year in the United States, 0:01:24.520 --> 0:01:26.720 and the average cost of those weddings is a little 0:01:26.720 --> 0:01:29.760 shy of thirty thou dollars, and so he estimates that 0:01:29.800 --> 0:01:32.560 it's actually an eighty billion dollar industry. And that's that's 0:01:32.600 --> 0:01:35.520 just ho. But Brian, I'm sure after your plus of 0:01:35.560 --> 0:01:38.120 planning your own wedding, you're well aware of how expensive 0:01:38.120 --> 0:01:40.839 these celebrations are. This is no news to you. Yes, 0:01:41.120 --> 0:01:43.640 I am acutely aware of that. Um. A lot of 0:01:43.640 --> 0:01:46.600 the reasons why weddings are so expensive, though, can sort 0:01:46.600 --> 0:01:49.360 of really be explained by some of the economic theory 0:01:49.440 --> 0:01:51.360 that I and I'm sure a lot of the people 0:01:51.400 --> 0:01:55.080 listening to this podcast learned in their freshman year economics classes. 0:01:55.120 --> 0:01:59.680 You have a range of textbook terms, price discrimination, supplied 0:01:59.720 --> 0:02:04.200 demand and elasticity of demand, price in sensitivity, all this stuff. 0:02:04.240 --> 0:02:06.440 And before you go any further, um, you know, for 0:02:06.560 --> 0:02:09.080 some of those listeners who maybe a year or ten 0:02:09.240 --> 0:02:12.120 outside of their college econ classes, we have a really 0:02:12.160 --> 0:02:14.840 special guest to help us figure this all out. Austin 0:02:14.840 --> 0:02:17.399 Goolsby is here with us. He's a former White House 0:02:17.440 --> 0:02:21.400 economic advisor to President Obama and since he's been a 0:02:21.440 --> 0:02:25.760 strategic partner at thirty two Advisors, leading their economic intelligence practice. 0:02:26.240 --> 0:02:28.560 He's talking to us from Chicago, where he's also an 0:02:28.560 --> 0:02:32.360 economics professor at the University of Chicago's Booth School of Business. Austin, 0:02:32.360 --> 0:02:34.400 thanks so much for joining us. Yeah, thank you for 0:02:34.480 --> 0:02:36.919 having me, of course, And so in addition to all 0:02:36.960 --> 0:02:40.120 of Austin's very impressive accolades, he he's also a happily 0:02:40.160 --> 0:02:45.440 married man. Congratulations, thank you. So he was married and 0:02:46.000 --> 0:02:48.080 I read a little bit about this, but tell us 0:02:48.360 --> 0:02:51.760 kind of how you learn firsthand some price discrimination and 0:02:51.880 --> 0:02:55.520 ECON things at work when you're planning your own wedding. Well, 0:02:56.040 --> 0:02:59.080 as anybody who's gotten married knows, planning your wedding as 0:02:59.120 --> 0:03:01.000 a nightmare, and it's only gotten you know, I've been 0:03:01.040 --> 0:03:03.079 married a long time. It was a nightmare then, it's 0:03:03.120 --> 0:03:07.480 only a bigger nightmare now. And uh so we were, 0:03:07.919 --> 0:03:11.560 you know, we were a little older, so we both 0:03:11.560 --> 0:03:13.520 had my wife and I both had jobs, so we 0:03:13.520 --> 0:03:16.840 were doing it on our on our own. Here. We 0:03:16.840 --> 0:03:19.079 we had moved to Chicago, my wife from New Jersey. 0:03:19.200 --> 0:03:22.919 So we're having the wedding here, and you know, there's 0:03:22.960 --> 0:03:25.919 a hundred things you gotta figure out, and the chairs 0:03:26.080 --> 0:03:28.919 and then do you want the cups to be taller 0:03:28.960 --> 0:03:33.440 and shorter and what? And this just a thousand decisions. 0:03:34.160 --> 0:03:39.200 We finally find the place, and it's a place the 0:03:39.280 --> 0:03:42.440 Chicago Cultural Centers downtown. It used to be the public Library. 0:03:42.520 --> 0:03:45.640 Is a really nice uh it's a really nice big 0:03:45.720 --> 0:03:48.880 room and it's got a dome and it and entile 0:03:49.080 --> 0:03:53.440 in this but it's run by the city, so it's 0:03:53.480 --> 0:03:56.920 not it's not integrated. It doesn't come with food or whatever. 0:03:57.000 --> 0:04:00.360 You have to arranged to have somebody coming to bring 0:04:00.400 --> 0:04:02.320 the food and bring the chairs and bring the table. 0:04:02.560 --> 0:04:05.800 So I'm talking to the food people and I say, 0:04:06.400 --> 0:04:11.080 you know, there's gonna be whatever people there, and we're 0:04:11.080 --> 0:04:13.560 gonna have these tables. We're gonna have a band and 0:04:13.560 --> 0:04:15.800 they're like, yes, yes, And so we come to the 0:04:15.840 --> 0:04:17.960 end and I said, uh, I said, how much is 0:04:17.960 --> 0:04:22.400 that gonna be? And I can't remember what the orders 0:04:22.440 --> 0:04:23.880 of man to do are, but let's say they said, 0:04:24.120 --> 0:04:27.880 you know, but that'll be seventy dollars a person. I'm like, god, 0:04:28.040 --> 0:04:32.200 seventy dollars a person. I say, okay, and where you know, 0:04:32.360 --> 0:04:35.120 can we have the ceremony or you know. I said 0:04:35.120 --> 0:04:37.040 something about the ceremony and the guy says, whoa, whoa, 0:04:37.040 --> 0:04:40.479 wait a minute, this is a wedding And I said yes. 0:04:40.560 --> 0:04:43.200 He's like, oh, that is a hundred forty a person. 0:04:43.400 --> 0:04:46.080 I was like, what why But it's the same We're 0:04:46.120 --> 0:04:51.200 in the same place. And he and that, the caterer said, 0:04:52.000 --> 0:04:54.239 And I love it that that he said it that way. 0:04:54.600 --> 0:04:58.080 He was like, well, people are willing to pay a 0:04:58.120 --> 0:05:01.600 lot more if it's a wedding. He was He wasn't 0:05:01.600 --> 0:05:04.520 even making he wasn't even pretending that there was some 0:05:04.680 --> 0:05:07.159 other thing like oh, it's more costly and we have 0:05:07.240 --> 0:05:11.440 to make the food better. He basically just said, um, 0:05:11.560 --> 0:05:14.799 exactly what Brian said. People's willingness to pay is higher. 0:05:15.320 --> 0:05:18.960 They don't want it to be best up. You know whatever, Um, 0:05:19.080 --> 0:05:21.200 we're gonna we can get away with charging morph it's 0:05:21.200 --> 0:05:23.760 a wedding, while Austin, that sounds like a really clear 0:05:23.800 --> 0:05:28.279 textbook case of price discrimination totally. I was teaching micro 0:05:28.440 --> 0:05:31.599 at the time, and so I'm teaching price discrimination. But 0:05:31.760 --> 0:05:34.440 you were teaching microeconomics at the time that you had 0:05:34.480 --> 0:05:37.920 to deal with price discrimination. Yes, And in fact, the 0:05:39.160 --> 0:05:41.520 I was I had to teach on the weekend, and 0:05:41.560 --> 0:05:43.800 I had to teach the morning of my wedding. And 0:05:43.800 --> 0:05:48.039 there's this photo of me standing there in a tuxedo 0:05:48.320 --> 0:05:52.200 teaching class. I finished the class, I go down and 0:05:52.240 --> 0:05:55.760 I and I get married. And the day of that 0:05:55.880 --> 0:06:00.120 class was the monopoly markup formula for anybody who's who 0:06:00.160 --> 0:06:03.360 was into micro which is basically the center of all 0:06:03.400 --> 0:06:07.360 price discrimination, it says, here's the formula you use once 0:06:07.400 --> 0:06:10.680 you know how sensitive the customer is, here's how you 0:06:10.760 --> 0:06:13.600 jack up the price on them, which is virtually exactly 0:06:13.600 --> 0:06:17.080 what happened to you. Yep, that's just incredible, I mean, 0:06:17.240 --> 0:06:18.919 and I think that's what kind of Brian and I 0:06:19.520 --> 0:06:21.560 what we were so attracted to you about this show 0:06:21.680 --> 0:06:24.760 is because so many things that happen in weddings can 0:06:24.760 --> 0:06:28.160 be explained by these I mean econ one oh one 0:06:28.720 --> 0:06:32.159 series and principles like price discrimination like what you're talking about. 0:06:32.520 --> 0:06:34.800 But I think what's really interesting in Brian like kind 0:06:34.800 --> 0:06:37.520 of talking. I mean, it's not that way in all markets. 0:06:37.600 --> 0:06:40.159 It's and weddings are unique, right, I think there's definitely 0:06:40.160 --> 0:06:44.559 an information gap between the buyers and sellers of various uh, 0:06:44.600 --> 0:06:48.520 you know, wedding needs. Um you've got like flowers for example. 0:06:48.640 --> 0:06:51.440 I mean, the people who are selling you flowers certainly 0:06:51.480 --> 0:06:54.760 know the prices and certainly know how available the supply 0:06:54.839 --> 0:06:57.400 of flowers is. And you, as a seller, you're coming 0:06:57.400 --> 0:07:00.640 in and you're buying you know, thousands of dollars worth 0:07:00.680 --> 0:07:03.279 of flowers for the first time to populate your venue, 0:07:03.279 --> 0:07:06.320 and you just don't know how much each costs. And 0:07:06.440 --> 0:07:10.160 you can't go item by item and comparison shop in 0:07:10.280 --> 0:07:13.000 any sort of timely manner in Austin. Help us out here, 0:07:13.040 --> 0:07:16.680 help us bridge the gaps. So typically post Internet, we've 0:07:16.680 --> 0:07:19.680 been dealing with mostly transparent markets. I'm thinking of like 0:07:19.720 --> 0:07:22.120 the airlines and now you have Kayak, you have orbits. 0:07:22.160 --> 0:07:24.480 I mean, and even for you know, market markets, so 0:07:24.800 --> 0:07:27.800 I mean fixed income our own company, Bloomberg pretty much 0:07:28.080 --> 0:07:31.440 created the transparency to that market, but it's not the 0:07:31.480 --> 0:07:33.320 same way in weddings. Can you kind of help us 0:07:33.440 --> 0:07:38.280 frame how important transparency is for efficient markets? Well, I 0:07:38.280 --> 0:07:40.520 guess I would walk it through in a couple of ways. 0:07:41.520 --> 0:07:46.000 With any brice discrimination, what information you have about the 0:07:46.080 --> 0:07:49.520 customers and their willingness to pay is one huge element. 0:07:50.000 --> 0:07:53.360 And the second is you have to have the ability 0:07:53.440 --> 0:07:59.680 to prevent people from arbitraging or reselling the thing somewhere else. 0:07:59.720 --> 0:08:05.040 So if I can go buy a million tickets to 0:08:05.160 --> 0:08:08.280 the movies at the student discounted price and then just 0:08:08.320 --> 0:08:11.720 turn around and resell them to non students, you you 0:08:11.760 --> 0:08:14.840 won't be able to get away with price discrimination. I 0:08:14.880 --> 0:08:21.800 think part of what happens with transparency online is you've 0:08:21.800 --> 0:08:28.280 got multiple sellers. Once you get into transparent market, everybody's 0:08:28.280 --> 0:08:32.079 trying to undercut each other to steal the business. If 0:08:32.120 --> 0:08:35.360 you live so my parents live in Abilene, Texas, they're 0:08:35.360 --> 0:08:40.840 retired there. There's only one carrier that flies to Abilene, Texas. 0:08:40.920 --> 0:08:45.439 It's American Airlines. So you can have kayak, you can 0:08:45.480 --> 0:08:48.640 have orbits, you can have whatever you want. The fact is, 0:08:48.840 --> 0:08:52.560 when you're flying to Abilene, you're gonna pay because American 0:08:52.559 --> 0:08:55.440 Airlines they can be transparent, but they can charge you 0:08:55.480 --> 0:08:57.880 a lot because they know if you're flying to Abilene, 0:08:57.960 --> 0:09:00.880 you're not really going to have that many substitutes. The 0:09:00.960 --> 0:09:04.160 substitute is get off in Dallas and go rent a 0:09:04.240 --> 0:09:07.319 car and drive for four hours to get to my parents. 0:09:07.360 --> 0:09:11.800 That happens with weddings. Okay, so Brian's right. They know 0:09:11.920 --> 0:09:15.160 more about the flowers, they know more about what's rare. 0:09:15.520 --> 0:09:19.880 They've got a package deal of a whole bunch of things, 0:09:19.880 --> 0:09:23.319 and you can't find one. You can't separate out how 0:09:23.400 --> 0:09:26.760 much are the ballroom chairs versus the folding chairs versus 0:09:26.760 --> 0:09:28.640 the whatever. I mean, I guess you can. But there's 0:09:28.679 --> 0:09:32.640 just a hundred things that you would pay money to 0:09:32.800 --> 0:09:36.680 just not have the decide. And then you get the third, 0:09:37.440 --> 0:09:41.600 which is whether it's because of the scale, whether it's 0:09:41.640 --> 0:09:46.120 because there's only a limited number of vendors who want 0:09:46.120 --> 0:09:50.160 to deal with the pressure of a wedding. But it's 0:09:50.240 --> 0:09:53.400 hard to get a lot of competition. It's hard to 0:09:53.400 --> 0:09:59.079 induce an auction for wedding photographers. There is no kayak 0:10:00.000 --> 0:10:02.880 available of I'm going to go on here and figure 0:10:02.920 --> 0:10:06.239 out if somebody will somebody will bring in the alcohol 0:10:06.880 --> 0:10:09.920 separate from the food at a lower price. They lists 0:10:10.000 --> 0:10:12.600 largely don't do that. And I think the bigger question 0:10:13.320 --> 0:10:16.960 is why isn't there more entry into what seems like 0:10:17.720 --> 0:10:22.160 very profitable economics of these wedding businesses. How how are 0:10:22.160 --> 0:10:26.120 they not How are people not falling over themselves trying 0:10:26.120 --> 0:10:29.200 to drive the prices down to more competitive levels. And 0:10:29.200 --> 0:10:31.400 I don't really know the answer to that. Well, maybe 0:10:31.400 --> 0:10:33.760 I can help you out because I was speaking to 0:10:33.840 --> 0:10:36.920 the president of kind of the Trade, the leading trade 0:10:37.000 --> 0:10:39.880 organization for wedding vendors, David Wood, and he was telling 0:10:39.880 --> 0:10:41.520 me that a lot of the reason why that happens 0:10:41.640 --> 0:10:46.200 because the market is so fragmented and is so decidedly local. So, 0:10:46.280 --> 0:10:49.880 for example, for flowers, you're probably going to be going 0:10:49.920 --> 0:10:52.920 with a local forest because you can't ship in flowers 0:10:52.920 --> 0:10:55.840 from somewhere else. Right, locality is very important, and same 0:10:55.880 --> 0:10:58.559 with venues, right like their mother very nature, they can 0:10:58.600 --> 0:11:01.560 only be in in certain places. He was saying that 0:11:01.679 --> 0:11:05.880 because because of the kind of fragmented and highly local 0:11:06.360 --> 0:11:09.440 nature of the market, it's hard to kind of even 0:11:09.440 --> 0:11:11.679 though it is right for disruption and I am so 0:11:11.720 --> 0:11:15.200 sorry I just use that word. But even though it is, 0:11:15.320 --> 0:11:17.280 it hasn't been able to happen because of that. But 0:11:17.320 --> 0:11:19.640 I think the other thing I mean, Brian, I mean, 0:11:19.800 --> 0:11:23.400 tell me about Emily's preferences. How, I mean, how strong 0:11:23.480 --> 0:11:25.880 have her preference has been, because that's the other aspect, 0:11:26.040 --> 0:11:28.600 like if you want something, you want something and you 0:11:28.640 --> 0:11:30.840 don't care how much it costs. So Brian, kind of 0:11:30.880 --> 0:11:33.840 how what's your experience been with that, not just her preferences, 0:11:33.920 --> 0:11:36.880 my preferences to it's your both day, not just heard it. Well, 0:11:37.240 --> 0:11:39.560 I think it's really interesting. That's what Austin brings up 0:11:39.559 --> 0:11:42.120 about sort of being able to resell movie tickets or 0:11:42.160 --> 0:11:45.840 whether it's a kayak for wedding photographers. It's just it 0:11:45.920 --> 0:11:51.000 just does not seem feasible because it's so intensely personal. Um, 0:11:51.480 --> 0:11:55.280 you can't just go online and figure out how comfortable 0:11:55.320 --> 0:11:57.839 you are in front of your photographer or your videographer. 0:11:57.880 --> 0:11:59.360 You want to meet with them, you want to speak 0:11:59.400 --> 0:12:01.960 with them, you want to hear their experiences, and you 0:12:01.960 --> 0:12:04.280 want to feel like if they reflect what you want 0:12:04.280 --> 0:12:06.960 to get out of the day. So I think it's 0:12:07.040 --> 0:12:09.640 really tough and I'm I'm just wondering maybe Austin you 0:12:09.679 --> 0:12:12.880 can talk a little bit about how how strong preferences 0:12:12.960 --> 0:12:18.400 and having having that on on the bye side um affects, uh, 0:12:18.440 --> 0:12:21.320 you know, price and insensitivity and how they're able to 0:12:21.720 --> 0:12:24.560 market prices. From a ventor point of view, I think 0:12:24.559 --> 0:12:28.160 it does matter, and sort of the one way to 0:12:28.200 --> 0:12:32.640 think of it is there are some products like like sushi, 0:12:32.640 --> 0:12:37.000 like brain surgery and others which just the fact that 0:12:37.040 --> 0:12:39.160 somebody comes in and says, well, i'll give you the 0:12:39.240 --> 0:12:42.560 same thing for half price does not induce a whole 0:12:42.559 --> 0:12:44.719 bunch of demand to switch to them, you know, the 0:12:44.880 --> 0:12:48.560 half price sushi, half price brain certain you're thinking like 0:12:48.640 --> 0:12:51.320 whoa wait a minute, The quality makes a big difference. 0:12:51.760 --> 0:12:55.160 And I do think some element of that that that's 0:12:55.200 --> 0:13:00.480 correlated with what how strong are people's preferences, and that 0:13:00.720 --> 0:13:04.360 has a strong bearing in weddings because if you if 0:13:04.440 --> 0:13:07.760 you I don't know, I don't know your wife, you know, 0:13:07.800 --> 0:13:11.520 but if you go to say, hey, honey, great, great news. 0:13:12.200 --> 0:13:15.760 I've got a florist who says that they're willing to 0:13:15.840 --> 0:13:19.000 do everything you said you wanted in flowers, but for 0:13:19.160 --> 0:13:22.480 one third the price, and they're gonna bring the flowers 0:13:22.520 --> 0:13:24.959 over here from West Virginia. You know we're gonna we're 0:13:24.960 --> 0:13:27.480 gonna bring it in from a market that's a lot cheaper. 0:13:28.080 --> 0:13:31.160 There are gonna be people who say, who say, in 0:13:31.240 --> 0:13:35.160 your family, this may be remembered as the Brian incident, 0:13:35.480 --> 0:13:37.960 and you may hear about that for the next forty years. 0:13:39.559 --> 0:13:41.600 That that's a great way actually, And it's I think 0:13:41.640 --> 0:13:43.720 it's interesting you bring up the medical thing too, and 0:13:43.800 --> 0:13:46.440 like you know, half off isn't always great. I mean, 0:13:46.480 --> 0:13:48.040 that's I mean, that's a huge thing. There's a lot. 0:13:48.040 --> 0:13:50.480 I mean, there's an economic principle. It's the names escaping 0:13:50.520 --> 0:13:53.360 me right now. But the idea is the more something costs, 0:13:53.400 --> 0:13:55.360 the more you want it. What is the superior versus 0:13:55.400 --> 0:13:58.840 inferior goods? Well, it sounds like signaling, you know, we 0:13:58.840 --> 0:14:02.600 we've got a thing of of any any time when 0:14:02.640 --> 0:14:07.400 there's not just uniform products, let's let's call it that way. 0:14:07.440 --> 0:14:12.560 They're not just homogeneous. There are quality lad there's there's 0:14:12.600 --> 0:14:18.480 both what the economists called horizontal differentiation of slightly all 0:14:18.480 --> 0:14:21.080 the goods are slightly different from each other, but also 0:14:21.240 --> 0:14:24.400 vertical some of them are just better than others. And 0:14:24.440 --> 0:14:27.840 we can all agree. Let's say that you know, the 0:14:28.320 --> 0:14:31.640 burritos at Chipotle are better than a taco bell that 0:14:31.720 --> 0:14:34.600 are better than a del Taco you know whatever. If 0:14:34.600 --> 0:14:39.200 you have some ordering of quality, um, and people have 0:14:39.280 --> 0:14:44.440 a taste for quality, then it's gonna make the normal 0:14:44.600 --> 0:14:47.160 rules of the market. It's not that they don't apply, 0:14:47.280 --> 0:14:50.320 it's just that they get more complicated. And you can 0:14:50.400 --> 0:14:56.120 have situations where in an intensely local market where there's 0:14:56.160 --> 0:14:59.240 a high taste for quality and hopefully you're only doing 0:14:59.280 --> 0:15:04.040 this once and it's a big budget thing that you 0:15:04.240 --> 0:15:07.880 just want to make sure that like in the old 0:15:08.000 --> 0:15:10.440 days they used to say, nobody ever got fired for 0:15:10.520 --> 0:15:14.840 buying an IBM. You know, yes it costs more to 0:15:15.040 --> 0:15:19.520 go with the well known caterer, but you know it's 0:15:19.520 --> 0:15:22.640 not going to be screwed up, and that your mother 0:15:22.720 --> 0:15:26.040 in law is not gonna hold against you. You know 0:15:26.160 --> 0:15:30.120 that he saved us five hundred dollars and he got 0:15:30.200 --> 0:15:32.800 us a thing that went horribly wrung right at a 0:15:32.800 --> 0:15:34.600 certain point is just not even worth it, which I 0:15:34.600 --> 0:15:37.720 mean I think you know, throwing out somewhere you know 0:15:37.840 --> 0:15:41.520 econ buzzwords. I mean, that's a lot of demanded elasticity too. 0:15:41.560 --> 0:15:44.400 I mean, I'm thinking, like the Plaza Hotel, doesn't matter 0:15:44.440 --> 0:15:46.880 how much the Plaza Hotel costs. There's always going to 0:15:46.920 --> 0:15:50.120 be someone who's going willing to pay the venue price 0:15:50.200 --> 0:15:52.160 to have their winning at the Plaza Hotel in New York. 0:15:52.160 --> 0:15:55.360 It doesn't really matter like the I mean, the amount 0:15:55.400 --> 0:15:58.040 that they I mean, this is just the principle last Disney. Right, 0:15:58.120 --> 0:16:00.560 the amount that they raised that venue price buy is 0:16:00.680 --> 0:16:03.240 going to have a very different effect of how many 0:16:03.240 --> 0:16:07.200 people are become unwilling to buy it. Right. That is true, 0:16:07.520 --> 0:16:13.400 though there's a there's a somewhat non intuitive result. It 0:16:13.480 --> 0:16:18.280 comes out of the theory which says, anybody who has 0:16:18.440 --> 0:16:23.000 market power shouldn't already know that, and they should have 0:16:23.200 --> 0:16:28.320 already raised the prices up so high that actually their 0:16:28.480 --> 0:16:33.480 customers are price sensitive, because if they weren't, if if 0:16:33.520 --> 0:16:39.160 the Plaza hotels customers were as price insensitive as you're describing, 0:16:39.440 --> 0:16:42.240 then they already should have raised the price even more 0:16:42.480 --> 0:16:45.840 and just keep on raising it until even the shake 0:16:45.960 --> 0:16:49.840 of whatever it says, my god, the plaza cast that money. 0:16:49.880 --> 0:16:53.800 If you're not gonna pay one cent more. So, I 0:16:53.840 --> 0:16:57.920 think the basic question of what is a what makes 0:16:58.600 --> 0:17:04.480 a good more price sensitive have a higher demand. Elasticity 0:17:04.840 --> 0:17:07.239 is kind of the same thing as well. What are 0:17:07.240 --> 0:17:14.080 the substitutes? And to the extent that a flower supplier 0:17:14.400 --> 0:17:18.320 from some other market that's far away is not a substitute, 0:17:18.960 --> 0:17:23.000 then that's gonna tend to make the buyers less price sensitive. 0:17:23.560 --> 0:17:26.399 To the extent that there are big quality differences, that 0:17:26.480 --> 0:17:31.960 the Plaza hotel is something higher class than the best 0:17:32.040 --> 0:17:36.440 Western that's gonna make the that's gonna make the elasticity 0:17:36.520 --> 0:17:41.159 is different. And the essence of price discrimination, if you 0:17:41.280 --> 0:17:44.800 just say from the back to the to the brass 0:17:44.920 --> 0:17:49.760 tax economic theory is you've got to be able to 0:17:49.800 --> 0:17:52.520 figure out who's more or less price sensitive, and you've 0:17:52.520 --> 0:17:56.040 got to be able to prevent them from You gotta 0:17:56.119 --> 0:17:59.520 know who who is more price sensitive, you gotta be 0:17:59.600 --> 0:18:04.440 able to to identify and charge them, and you've got 0:18:04.440 --> 0:18:07.640 to be able to prevent them from reselling to others. 0:18:07.720 --> 0:18:13.480 And in most of those cases the normal problems that 0:18:13.480 --> 0:18:17.240 that people face. So take the airlines, their price discriminating, 0:18:17.560 --> 0:18:21.240 but they have the problem of trying to figure out 0:18:21.560 --> 0:18:25.399 who are they know there are some not sensitive to 0:18:25.560 --> 0:18:29.200 price customers, but they don't know who they are just 0:18:29.320 --> 0:18:33.240 from calling up. They know that their business people. But 0:18:33.359 --> 0:18:36.199 they if you call and you're a business person and 0:18:36.320 --> 0:18:39.639 you use a lot of hey, dude, you know, and 0:18:39.720 --> 0:18:42.000 you try to sound like a student and dress like 0:18:42.040 --> 0:18:45.000 a student, uh, so that you would get a lower price, 0:18:45.240 --> 0:18:48.439 they have to design the product to force you to 0:18:48.520 --> 0:18:51.119 stay a Saturday, to force you to have a long 0:18:51.760 --> 0:18:55.440 um buy it well in advance. All of those are 0:18:55.600 --> 0:18:58.320 just things that they're using to try to get you 0:18:58.400 --> 0:19:04.200 to separate yourself yourselves into the types of customers you are. 0:19:05.200 --> 0:19:08.879 People who supply weddings don't have to do that because 0:19:09.440 --> 0:19:14.680 they know wedding customers are less price sensitive and they 0:19:14.800 --> 0:19:18.440 know you're getting married. Hence the guy with the with 0:19:18.480 --> 0:19:22.280 the chicken dinners. For me, my goal, as I said 0:19:22.320 --> 0:19:24.480 to my wife, I said, my goal on the food 0:19:24.600 --> 0:19:29.440 is I don't want anyone to remember the food at 0:19:29.480 --> 0:19:33.560 our wedding in any way not good and not bad, 0:19:33.840 --> 0:19:36.280 because if they remembered him like that was the best 0:19:36.320 --> 0:19:39.679 food I ever had, too much, way too much, and 0:19:39.720 --> 0:19:42.640 if they remember it was like that was horrible. I 0:19:42.680 --> 0:19:46.639 didn't want that. But just some middle ground would be 0:19:46.680 --> 0:19:50.240 totally fine. So I'm not going to get Boston Market 0:19:50.280 --> 0:19:53.320 to cater the wedding. But you know, as long as 0:19:53.359 --> 0:19:56.800 it was of acceptable quality. But as soon as the 0:19:56.840 --> 0:20:00.359 guy heard that it was for a wedding, he was like, 0:20:00.480 --> 0:20:03.080 you just solved my problem because you just tell me 0:20:03.280 --> 0:20:07.639 that you are not price sensitive, so price is higher. Okay. 0:20:07.640 --> 0:20:11.680 So Austin, one last question. Two of your students their 0:20:11.880 --> 0:20:14.639 PhD and this is hypothetical. Two of your students. So 0:20:15.240 --> 0:20:17.760 I was like, who know, these are just hypothetical students 0:20:18.240 --> 0:20:21.679 economics PhDs. And they go to you and they're saying 0:20:21.720 --> 0:20:23.920 that we want to avoid all these traps. We want 0:20:23.920 --> 0:20:26.359 to have the most price efficient wedding. How do you 0:20:26.400 --> 0:20:28.800 do it? Let's let's make this actionable. Oh I think 0:20:28.840 --> 0:20:30.680 we're gonna say, do you tell them not to get 0:20:30.680 --> 0:20:37.679 married on a positive note? Um? Okay, so how you 0:20:37.800 --> 0:20:42.440 do it? Look, the secrets of price discrimination to the 0:20:42.480 --> 0:20:47.840 merchant are they have more information than you have. They 0:20:47.960 --> 0:20:50.439 know how price sensitive you are, and they're trying to 0:20:50.480 --> 0:20:56.480 prevent you from doing uh resale and prevent the cross shopping. 0:20:57.080 --> 0:21:00.280 So you try to beat them on every on every 0:21:00.320 --> 0:21:05.320 measure one you leave them like scratching their head. Wait, 0:21:05.400 --> 0:21:08.160 are these people who want a fancy wedding or not, 0:21:08.520 --> 0:21:10.800 you know. So so you drop things, You're like, yes, 0:21:11.160 --> 0:21:14.480 we want that, and you know, the the groom to 0:21:14.640 --> 0:21:17.840 be says, uh, we want we want fine China. And 0:21:17.880 --> 0:21:20.000 then in their mind they're like, ah, so this is 0:21:20.040 --> 0:21:22.600 gonna be expensive wedding. But then you plan it and 0:21:22.640 --> 0:21:26.040 you say like, do you think we should um do 0:21:26.080 --> 0:21:30.200 you think we should have free gum as, the as, 0:21:30.240 --> 0:21:32.960 the as, the departure present, you know, at the wedding, 0:21:33.080 --> 0:21:35.159 And so the first is like, wait, what you know? 0:21:35.240 --> 0:21:37.800 And so one of you is wearing something that's like 0:21:38.359 --> 0:21:41.400 ripped and really kick pull up in a car that's dented, 0:21:41.520 --> 0:21:44.280 you know, so they don't know what to make of you. 0:21:45.040 --> 0:21:48.000 Are you a person who's what they want? If they 0:21:48.040 --> 0:21:51.560 conclude you're a person who wants only the finest, then 0:21:51.640 --> 0:21:55.000 you're gonna be Mr Markup or Miss mark Up to them. 0:21:55.119 --> 0:21:57.480 They're gonna jack up the price of everything. So you 0:21:57.480 --> 0:22:00.280 want them to think you don't have as much money 0:22:00.600 --> 0:22:06.040 um as as they originally thought to shop around as 0:22:06.119 --> 0:22:11.000 much as you can. Every additional bid you get is 0:22:11.040 --> 0:22:14.160 gonna just make you that much more informed and that 0:22:14.240 --> 0:22:18.879 much better able to play off against them on No wait, 0:22:18.920 --> 0:22:21.920 a second. You know you're gonna charge me a hundred 0:22:21.920 --> 0:22:25.640 dollars a person for the food, but I can get 0:22:25.640 --> 0:22:28.160 the same thing for these other guys for seventy five. 0:22:28.240 --> 0:22:31.679 You know you forced them to compete because competition destroys 0:22:31.720 --> 0:22:35.720 their ability to price discriminate. And if you can, you 0:22:35.840 --> 0:22:39.520 find some some opportunity for resale. You know you you 0:22:39.640 --> 0:22:43.520 got you got left over wine bottles or something. You 0:22:43.760 --> 0:22:48.359 friends getting merry, you hand them the wine here, you know. 0:22:48.840 --> 0:22:52.520 So So I think basically the theory says you just 0:22:53.280 --> 0:22:56.960 you gotta try to and I guess it also says 0:22:57.040 --> 0:23:00.560 if you can help it. Normally, the economists take your 0:23:00.600 --> 0:23:04.080 demand as given. They have no input on how bad 0:23:04.160 --> 0:23:08.879 you want something. Um. They then just go from given that, 0:23:08.960 --> 0:23:11.400 here's how bad you want it, here's how to try 0:23:11.400 --> 0:23:14.960 to get more competition, to make the market blower. As 0:23:15.040 --> 0:23:18.880 your friend, I would tell you, try to not have 0:23:18.960 --> 0:23:21.880