Monday, November 15, 2004

Popcorn Economics 

For years now, I have witnessed curious economics at the Pennsylvania train station in New York. For those who have never visited the station, about 100,000 people a day pass through: They enter it from outdoors and from subways underground.

The economics has to do with popcorn pricing, and it says something about communications and people -- topics PR practitioners are concerned with. Here is the situation. Near the station's entrances, popcorn vendors sell their product for $1.50 per bag. They use the same bag and the same popcorn. There is no difference. Yet, just 50 steps into the station along the same corridor, there is a popcorn stand that sells its product for $1.00 -- again, using the same bag and the same popcorn. For some reason, vendors at doors sell for higher prices than the vendor in the middle of the station. It isn't a case of foot traffic. Tens of thousands of people pass the stands. Yet, $1.50 stands always seem more crowded than the dollar one.

I have never figured out the reason for such price disparity. All stands have clearly marked signs and use the same machinery. People know of two prices, but it doesn't make a difference. Moreover, when the dollar stand lifted its price to $1.50, it lasted but a day or two and the price fell back. It's not branding because all stands work the same way. It's illogical.

What does that tell me? Logical argument is a fraction of economics and communications. Preferences override rationality for no good reason. We have always known this to be the case, but to see it in action just 50 steps apart is eyeopening.

Before you ask, I buy popcorn at the dollar stand. That is how I stumbled on the disparity in the first place.


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