Response to ‘The Problem With The Pink Tax’
Following a comprehensive study completed by New York State that found that women pay more for 30/35 product categories and up to 13 percent more for personal care products, The Indicator from Planet Money discussed the findings through the lens of an economist in an episode called ‘The Problem With The Pink Tax‘.
On one side, they argued that price discrimination is the efficient outcome because it allows for more variety in the market for all consumers. That women pay the ‘pink tax’ because of their preference towards certain products. On the other side they invoke a female economist from the 1930’s, Joan Robinson. Robinson suggests that in a perfectly competitive market price discrimination does not exist because any producer selling their product above the market price would be undercut.
To expand on Robinson’s view it is important to determine if the products are differentiated in their features. In other words, if the razors sold to women are actually different then the razor’s sold to men. If we take the assumption from the episode that the products are in fact identical in their features, then price discrimination may be a sign of asymmetric information in the market.
Firms have spent an immeasurable amount of marketing dollars to create this asymmetric information, marketing to women ‘since birth’ in order to create a market where consumers believe that their products are differentiated when they are actually the same. While price discrimination is efficient in most cases, firms have engaged in the inefficient practice known as rent seeking, the use of resources to obtain economic gain without reciprocal benefit to society. In this way, firms have not actually created additional product variety for the consumer but instead used marketing to create the illusion of variety.
While the episode seems to suggest that government intervention may be the best solution this could come with a host of unintended consequences, including the monumental cost of enforcement. Ultimately it falls to the collective hands of consumers to fight this harmful practice. In order to eliminate the pink tax, consumers must seek to gain more information about the products they purchase and reward the firm that produces the highest quality product at the lowest cost.
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