Tuesday, January 15, 2013

Markets and Politics

ThinkProgress is carrying a story (here) about a shop owner in Utah who charges "liberal" customers higher prices than "conservative" customers for smoothies.

I think this is just fine. In fact, I can see advantages to such political price discrimination for the same reason I'm happy to know how owners of businesses like Chick-fil-A, Olive Garden, and Anthropologie use their businesses to try to influence social policy.

In both cases, potential customers are fully informed of the political and economic implications of patronizing various businesses. If you choose to dine at Olive Garden (part of the Darden Restaurants chain), some of the money you spend there will further efforts to overturn or water-down "Obamacare." If you buy clothes at Anthropologie or Urban Outfitters, you will be supporting (to some extent at least) a corporate CEO with strong anti-gay political opinions. In short, the more we know about the politics of business owners and managers, the more individual customers can exercise their own political and social preferences through their buying decisions in markets with lots of choices.

Thus, a person who slightly prefers eating at Chick-fil-A to eating at KFC, might nevertheless decide to eat at KFC if their support of gay marriage tips the balance. I have no idea whether, or to what extent, the political views of corporate leaders actually influences consumer buying decisions. According to recent reports, business was down at Olive Garden and other Darden restaurants following its threats to cut hours for employees so that it could avoid compliance with the Affordable Health Act (see here).  It stands to reason that a CEO's support of controversial political positions (in either direction, relative to their customer base) could hurt profits. We wouldn't expect a smoothie bar in Cambridge, Massachusetts to last very long if it charged Liberals more than Conservatives. But, in Utah, such a pricing policy might actually maximize profits. CEOs of national companies, especially  publicly-traded, companies probably need to be even more careful about the political positions they stake out, to ensure that their politics don't harm the bottom line.

In any case, I think consumers-as-citizens tend to benefit in general from information provided by politically discriminatory pricing policies, as well as corporate statements of political positions.

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