Friday, February 27, 2009

Better Steer Clear of the Beverage Cart: Talk of Pay Toilets in the Air

Irish discount air carrier Ryanair is considering charging its passengers to use the on-board toilet. You can read more, and see a video of chief Michael O'Leary explaining it all, here.

For many, this seems cruel--to charge airborne captives to use a service for which (at the time) demand is highly inelastic. "Highly inelastic demand" is a term economists use to describe a situation in which a consumer's buying decision is not very sensitive to changes in the price she faces. Examples of goods for which demand is highly inelastic include things like emergency medical care, insulin for diabetics, and cigarettes for smokers. In all of these cases, a consumer's purchase decision is affected only slightly by modest fluctuations in the price.

In the case of pay toilets, I imagine demand for some would be very price inelastic. After all, nobody with an urgent need to use the toilet wants to be forced to simply do without. And surely charging someone to use the toilet in such an instance isn't very nice.

But this raises an interesting economic question: If Ryanair wants more money, why wouldn't it simply raise the price of a ticket for everyone, and keep toilets "free"? The answer is fairly simple, and is covered well in Chapter 16 of Steven Landsburg's wonderful book, The Armchair Economist. By keeping ticket prices low for everyone, and levying an additional fee for using the toilet, Ryanair would be able to extract different sums of money from different kinds of customers. In this case, those of us who don't use toilets in flight continue to enjoy low-priced airfares. And those of us who do use toilets in flight will pay a bit more in order to enjoy a flight experience that includes toilet use.

Could this strategy backfire? If passengers begin ordering fewer $5.00 drinks from the beverage cart to avoid paying $1.00 to use the toilet, perhaps. It will be interesting to see what Ryanair decides to do.

By the way, I can't help but be reminded of the Tony-award-winning musical Urinetown.

2 comments:

  1. But would all passengers end up paying more to cover the cost of cleaning after the predictably higher number of "accidents"?

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  2. Great comment! Thanks, Gram.

    I wonder whether other passengers would gladly pay a bit more to subsidize the bathroom privilege for all, to minimize the number of on-board "accidents." I know I would chip in to finance a trip to the loo for any seatmate of mine.

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