Wofford College
Price Discrimination or Differences in Cost
Economic theory states that when competition is high in a given market, the producers do not discriminate against consumers. Therefore, a difference in price between certain products or services is a result of an additional cost the producer must face. This theory can be used to explain many differences in price between seemingly similar products. For example, men’s dress shirts and women’s blouses are similar in shape and size, but there is a big difference in price between dry cleaning men’s and women’s shirts. According to economic theory, the resulting price difference must be attributed to an extra cost faced by the dry cleaner.
To realize the supplementary cost encountered by the drycleaners for women’s shirts but not men’s shirts, a basic understanding of dry cleaning is required. Most men’s dress shirts are made out of cotton; therefore, they are laundered rather than dry cleaned. The laundering process consists of the shirt being washed, and when it is still wet, the shirt is ironed using a pressing machine. Before the shirt is finished, it is ironed by hand to remove any remaining wrinkles. Women’s blouses that are “dry clean only” must remain dry through the cleaning process. Because the pressing machine can only be used on wet clothing, the “dry clean only” shirts must be ironed entirely by hand. In addition, many fancy shirts have fine stitching, embroidery, or beading. These editions require extra care while ironing which may take more time. As a result, the care and time essential in dry cleaning women’s blouses requires the drycleaner to increase employment. The average cost to dry clean a man’s dress shirt is $1.60, but a woman’s blouse cost about $4.30. Economic theory suggests that the increase in dry cleaning price between men and women’s shirts is the result of an additional cost incurred by the drycleaner for women’s but not men’s shirts. The price for dry cleaning is dependent on the amount of time and work required per an item. Therefore, the economical reason for the increase in price of dry cleaning women’s shirts can be attributed to the extra time and work that is required during the dry cleaning process.
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