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Your "Up-Charge" Is My Option


The professional laundry I use just informed me that their shirt-folding machine has broken, so they now must fold my shirts by hand. This of course means "an up-charge" - or so they say. How much? $0.35 per shirt.

So I have to pay a higher price as a consumer because the laundry can't maintain its equipment? So hear this manager talk, you would think that this was somehow built into the structure of the universe, a mandate from the Almighty that I must cough up. It's no one's fault but I have to pay the price.

Of course this is what the laundry wants me to believe, that the price for service is nothing other than a bundling up of their costs of doing business, and, therefore, if their costs rise, it is only just and right that I should pay more.

In reality, the only institution that can really so easily pass its higher costs onto the consumer is the government itself. And that's because they have all the guns and the law on their side.

For the rest of us, we have a choice. We can pay or go elsewhere. The price for laundry is not determined by the costs of doing business; rather, as the Austrians have taught, the costs any business is willing to bear over time is determined by the price that that the firm believes it can charge on the market.

Specific to this case, the laundry management believes that it can increase it prices - and their breaking of the folding machine is actually an irrelevant detail. If I had been willing to pay $2.35 per shirt all along, they should have already been charging me price.

Perhaps it is true that the management really believes that it is passing on its costs. Or perhaps the broken machine is the excuse they had been waiting for to test their theory that they can charge more.

It is certainly a speculation. Obviously at some point, it is worth it for me to do my laundry and fold my own shirts. It all depends on how I value my time.

It so happens, though, that one block away there is another laundry service without a broken folding machine. I don't know what they charge but what the price increase has actually done is inspire me to absorb the search costs of looking at other services in the area.

If I stay with the current provider, it is not because I'm willing to take a hit because their machine broke. It is because I still value a clean and folded shirt more than the $2.35 I have to pay to obtain that. It is really no more complicated than that - from the point of view of the consumer.

As I was leaving the laundry, I noticed that their house computer was booting up. It said Windows 98. I'm thinking that this place could end up cutting its costs over time with an overall upgrade.

In any case, the beauty of the market is that with or without an upgrade, I'm free to decline to take the hit for their management problems. Life would be very different if government would give us the same option of shopping for other services or perhaps even governing ourselves.

Jeffrey Tucker is Editorial Director of the American Institute for Economic Research. He is author of It's a Jetsons World: Private Miracles and Public Crimes and Bourbon for Breakfast: Living Outside the Statist Quo. Send him mail.

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