Marginal cost and market bags

After posting on the problem of “free” plastic bags at market, I ran across this interesting piece from Ezra Klein on the econonics of customer freebies like bread at a restaurant. The basic idea, which is nothing new, is that consumers do not behave rationally when something is percieved to be free. He recounts multiple excellent examples of such behavior, and the effects of even a tiny charge on changing consumer consumption of an item.

The problem as I see it, is that for incremental charges to work, they have to be percieved as unavoidable. One restaurant that charges for bread may lose offended customers to all the others that don’t. One grocery store that charges for bags, one market stand, etc. If everyone at a market charged equally for bags, perhaps the effect would take place. But if we just started it, chances are we’d annoy or offend customers who might go elsewhere, even if that extra nickel was more than worth the access to our produce.

Still, it’s a great quick look at the psychology of consumerism, and what kind of factors market farmers have to keep in mind as they compete for customers in a wide-open marketplace.

3 thoughts on “Marginal cost and market bags

  1. HyVee gives you 5 cents for each bag you bring (i.e each bag they save). May be the same can be done in the farmers market…

  2. Here in Toronto, not counting the independents (or Whole Foods), there are two types of grocery stores. One is the typical sort and they compete to be the nicest, best selection, etc. They give you bags. The other are “discount” grocers (often owned by one of the “name brand” places) and you have to pay 5 cents per bag (as well as deal with slightly less consistent selection, non-fancy displays, etc). People pay for those bags (or use the leftover boxes that are left in front) happily because overall they’ll save some money.But the other stores are now going to have to start charging a tax on plastic bags that the city is imposing. One of them, though, started charging early, saying they’re giving the money to a “green” charity (they name it, but I don’t remember it). As best as I know, they haven’t seen sales hurt. It would be interesting to find out if they go through fewer bags now too.

  3. The largest barrier to any discount or charge for bags at our stand is the sheer practicality of it. We work in quarter increments and really don’t want to stock a bunch of nickels just for that. And it’s one more time step in a very busy marketplace that can have multiple customers lined up waiting to be served.Joshua,Interesting pattern. I wouldn’t have expected the discount stores to be charging for bags, but it makes sense in a way. I have to say I’m not a fan of bag taxes. Just one more hassle for the store to deal with and track. I wonder how a deposit/return system would work, like that used for cans in some state, in that you got X amount for every plastic bag you brought back to a location.