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The sexist surcharge!!

Recent reports in the media have included headlines such as “Sexist surcharge” and “Pink premium?” Various claims have been made that women pay significantly higher prices for similar products than men.

The Times newspaper recently published the results from an investigation it carried out on the prices of hundreds of similar products that were marketed at both men and women. The study found that those products marketed at women cost 37% more on average than similar versions that were marketed at men. Examples included:

Disposable razors: Tesco priced a packet of five of its own-brand disposable razors for women at £1. The key characteristic that targeted the razors at female customers was the colour – they were pink. For the same price, a packet targeted at male customers (i.e. they were blue) contained 10 disposable razors.
Ballpoint pens: Staples priced a packet of five pastel-coloured Bic pens marketed ‘for her’ at £2.99. A packet of five Bic pens that were not in the ‘for her’ range (i.e. they had transparent barrels) were priced at £1.98.
Scooters: Argos increased the price of a child’s scooter by £5 if it was pink instead of blue.

Maria Miller, the chair of the Women and Equalities Select Committee, stated that:

“It is unacceptable that women face higher costs for the same product just because they are targeted at women. Retailers have got to explain why they do this.”

A more detailed study carried out by New York City’s Department of Consumer Affairs was published in December 2015. Average prices were collected for 794 individual items across 5 different industries. The key findings were that products marketed at women were

7 per cent more for toys and accessories
4 per cent more for children’s clothing
8 per cent more for adult clothing
13 per cent more for personal care products
8 per cent more for health products

Interestingly whereas the investigation in the UK only found examples of women paying higher prices than men, the New York study found some goods where the price was higher for men.

Reports in the media have claimed that this is clear evidence of price discrimination. Although this is likely to be true, it is impossible to say for certain without more detailed information on costs.

For example, when referring to the higher price for the razors marketed at women in the UK study, Richard Hyman, an analyst at RAH Advisory, stated that:

“the packaging will be different and they will sell fewer so it could be to do with the volume”

If economies of scale and the different costs of packaging can fully account for the difference in prices between the razors then it is not an example of price discrimination.

Articles
The sexist surcharge – how women get ripped off on the high street The Guardian 19/01/16
Women paying more than men for everyday products The Independent 19/01/16
Price differences for men and women ‘astonishing’ BBC 19/01/16
Pink premium? There are greater problems The Guardian 24/01/16
Being a women costs more than being a man CNBC 23/12/15

Questions

  1. Define price discrimination.
  2. Outline and explain the three different categories of price discrimination.
  3. Could a situation where a firms charges all of its customers the same price for a good or service ever be classed as an example of price discrimination?
  4. A firm with market power may still not be able to successfully implement a policy of price discrimination. Explain why.
  5. Under what circumstances could price discrimination improve allocative efficiency?
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