One of the hottest topics among business people is how to increase profits by being environmentally friendly. There are many ways to achieve this. At hotels, for instance, by not washing towels during a guest’s stay unless the guest asks, the hotel saves both money and the environment. Green innovations can be featured in advertising campaigns to attract customers. Another potential benefit of “going green” is that it makes environmentally minded employees happy, increasing their loyalty to the firm.
A Berlin brothel has hit on another way to use environmental arguments to its benefit: price discrimination. Mary MacPherson Lane writes in an AP article:
The bordellos in the capital of Germany, where prostitution is legal, have seen business suffer with the global financial crisis. Patrons have become more frugal and there are fewer potential customers coming to the city for business trips and conferences.
But Maison d’Envie has seen its business begin to return since it began offering the euro 5 ($7.50) discount in July, Goetz said.
To qualify, customers must show the receptionist either a bicycle padlock key or proof they used public transit to get to the neighborhood. That knocks the price for 45 minutes in a room, for example, to euro 65 from euro 70.
Although the brothel says the reason for the price discount is that it wants to be environmentally conscious, it sure looks to me like the brothel is dressing up some good old-fashioned price discrimination arguments in a green disguise.
Customers who come by bus or bicycle are likely to have lower incomes and be more price sensitive than those who arrive by car. If that is the case, the brothel would like to charge such customers lower prices than the richer ones. The difficulty is that, without a justifiable rationale, the rich customers would be angry if the brothel tried to charge them more (and indeed, how in general, would the brothel know who is rich?). The environmental argument gives the brothel cover for doing what it always wanted to do anyway.
(Hat tip: Daniel Lippman)
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If businesses go green to increase profits, given that such a price discrimination occurs, wouldn’t it still have an overall net benefit to the society because they resort to more environment-friendly practices?
Or perhaps there’s more to it than price discrimination alone?
Somehow, even though you write for the NY Times, you just offhandedly wrote off all cyclists and transit users as “lower income.”
Do you have any data to substantiate that stereotype-laden claim, or are you just celebrating in your bias?
Man, excellent article, but couldn’t you find another example than a brothel? Lol
Whoa, I think people are reading too much into Levitt’s word choice. He says that people who bike or use public transit are ***more likely to be lower income*** than people who drive. In other words, the expected income of a transit user in Europe is lower than the expected income of a car owner in Europe (where vehicle ownership costs are usually higher than in the United States). This does mean or infer that public transit riders and bicycle riders are poor!
I suspect the rationale might have had as much, if not more, to do with the free advertising it promised to generate through… stories such as the above:)
PS: as a continental European let me state that the hyp. that public-transport users and cyclists are disproportionately likely to be low-income doesn’t gel with my personal observations. In particular cyclists are unlikely to be disproportionately poor. Many people who have a car and could afford to drive all the time are likely to actively choose to cycle because
1) it’s healthier (and not particularly dangerous, given that most German cities have marked cycle lanes on the roads)
2) being stuck in traffic is hell (think inner-city rush hour).
3) finding parking spots in the city is often tiresome
4) it’s cool.
–> getting around by bike is much more practical and pleasant much of the time.
Indeed, given that the health and image-appeal of cycling are likely to be felt more strongly in the middle class, a plausible hyp. would in fact be that cyclists were likely to be, on average, Better off financially.
What about the shared cost to everyone for the water and energy that goes into extravagant and unnecessary use and washing of towels. Isn’t it a good thing when the hotel takes efficiencies into consideration regardless of motive. And won’t it all come out in the competitive wash eventually (as part of the competition to lower hotel costs and rates across the industry).
Maybe the bordello has genuine climate concerns (floods, famines, etc.) along with being tired of flabby car driving patrons. What is wrong with creating incentives for climate and physical health simultaneously. Not to mention of course, that the wealthy always get the best quality, no matter what the product or service.
This post appears to be one more example of (Super) Freakonomics taking a narrow view to promote an unscientific shortsighted specious conclusion. You guys defeat yourselves before you even start.
Well in a free competition situation, the price discrimination could not stand. BREAK THE WHOREHOUSE CARTEL!