Skip to main content

Stonehenge and fair pricing

We were recently passing Stonehenge and so stopped off to see what the new visitor's center was like. Given that we are members of English Heritage it was free for us to visit. Most visitors, though, were stumping up the standard entry fee of £13.90. And, to put it bluntly, £13.90 seemed like a bit of a rip-off.
         Why a rip-off? Stonehenge is a truly remarkable site. It is arguably best seen, however, from the many paths in the surrounding countryside - and these are completely free for anyone to walk. The entry ticket only gets you a 'little bit closer' to the stones. And I'm not sure that's worth £13.90. To put things in context I would make the comparison with Dover Castle (another English Heritage site). Dover Castle is more expensive at £19.30 but you get a whole lot more for your money - castle, wartime tunnels, museums, sea views etc. I would guess the average visitor to Stonehenge probably spends around 30 minutes at the stones while the average visitor to Dover Castle spends at least 3 or 4 hours.  
       While the entry fee for Stonehenge took me by surprise, the economist in me can easily rationalize it. We just need to look at supply and demand. When we visited Stonehenge it was heaving with tourists, all willing to pay the going rate. Dover has a steady stream of visitors but demand is clearly less (particularly when you take into account that many visitors are members and so get in for free). High demand can explain the relatively high fee. But does it make it any less a rip-off?
         One of the few research articles that studies attitudes to 'fair' pricing is Fairness as a constraint on profit seeking by Kahneman, Knetsch and Thaler, published in 1986. Their basic finding was that people consider it unfair to raise price because of shifts in demand. One question that beautifully illustrates the point is 'A hardware store has been selling snow shovels for $15. The morning after a large snowstorm, the store raises the price to $20. Please rate this action as: Completely Fair, Acceptable, Unfair, Very Unfair.' 82% of respondents considered this unfair. 
        My perception of Stonehenge being a rip-off partly fits this picture of unfairness. It seems unfair to charge a high price purely because of high demand. There seems, however, to be an important difference. The person buying a snow shovel knows what they are buying. A visitor to Stonehenge, by contrast, probably has little idea what they are buying. And they may think the price will be a fair one. In other words, the visitor trusts English Heritage to not rip them off. So, while the person buying the snow shovel will feel hard done by when he sees the price, The visitor to Stonehenge would will feel hard done by after seeing what they got for their money. 
         Despite the pioneering work of Kahneman, Knetsch and Thaler there is still remarkably little work done on fairness in pricing. This seems a topic in serious need of more study. And let me finish by clarifying that I am not having a go at English Heritage. As a charity they have to make money where they can. And if £13.90 does seem like a rip-off then membership will let you visit Stonehenge, Dover Castle and more!  
   
        
               

Comments

Post a Comment

Popular posts from this blog

Honesty around the world

In my last post I looked at dishonesty in the banking industry. Sticking with a similar theme, this time I will at dishonesty across different countries.        Let us start with a study by David Pascual-Ezama and a long list of co-authors on 'Context dependent cheating: Experimental evidence from 16 countries'. They asked 90 students in 16 different countries to perform a very simple task: toss a black and white coin and record the outcome. If the coin came up white the student obtained a red Lindt Lindor Truffle. If it came up black they got nothing. Crucially, the coin toss took place in private and so the student could report whatever outcome they wanted. If they wanted a chocolate then they simply had to report white. (The study contrasted three different methods of reporting - form put in a box, form given to the experimenter or verbally telling the experimenter - but I will skip those details here.)           The chart below summa...
Post a Comment
Read more

Prisoners dilemma or stag hunt

Over Christmas I had chance to read The Stag Hunt and the Evolution of Social Structure by Brian Skyrms. A nice read, very interesting and thought provoking. There’s a couple of things in the book that prompt further discussion. The one I want to focus on in this post is the distinction between the stag hunt game and the prisoners dilemma game.    To be sure what we are talking about, here is a specific version of both type of game. Adam and Eve independently need to decide whether to cooperate or defect. The payoff matrix details their payoff for any combination of choices, where the first number is the payoff of Adam and the second number the payoff of Eve. For example, in the Prisoners Dilemma, if Adam cooperates and Eve defects then Adam gets 65 and Eve gets 165. Prisoners Dilemma Eve Cooperate Defect Adam Cooperate 140, 140 65, 165 Defect 165,...
Post a Comment
Read more

Revealed preference, WARP, SARP and GARP

The basic idea behind revealed preference is incredibly simple: we try to infer something useful about a person's preferences by observing the choices they make. The topic, however, confuses many a student and academic alike, particularly when we get on to WARP, SARP and GARP. So, let us see if we can make some sense of it all.           In trying to explain revealed preference I want to draw on a  study  by James Andreoni and John Miller published in Econometrica . They look at people's willingness to share money with another person. Specifically subjects were given questions like:  Q1. Divide 60 tokens: Hold _____ at $1 each and Pass _____ at $1 each.  In this case there were 60 tokens to split and each token was worth $1. So, for example, if they held 40 tokens and passed 20 then they would get $40 and the other person $20. Consider another question: Q2. D...
Post a Comment
Read more