Euro Disney Pricing: Pure Mickey Mouse!
By Shlomo Maital
If you’re a manager or entrepreneur, here is a 100% certain proven way to get into hot water. Take the advice of economists. I should know – I am one of them.
EuroDisney is a good example. According to basic microeconomic theory, if you can segment markets with different prices, then you set prices inversely to the price sensitivity (or, elasticity) of demand. Low sensitivity? High price. High sensitivity? Low price.
Many Europeans buy Disney packages on-line. That means that Disney can charge people from different countries, different prices, because the Internet knows where you are. And of course, that’s just what Disney does. Disneyland Paris practices “geo-blocking” (Global New York Times, July 30, p. 18). “For an identical stay, the Euro Disney website often offers higher prices on German computers than on French ones.” Euro Disney had 14 million visitors last year with prepackaged prices. This year? Geo-blocking.
So what’s wrong with price discrimination, if you’re a monopoly and can get away with it? For one, it is not legal. The European Commission says national borders are supposed to be erased, and prices should be the same for all.
But worse than that — discriminatory pricing causes major resentment. Imagine that you bring your family from Berlin to Disney Paris, and find that your neighbor, on the merry-go-round, from Paris, paid half what you did. I know – it happens all the time on airplanes. Nearly everyone on the plane has paid a different price, from very high to very low.
Disney could say: If we charged one price, we’d have fewer customers, and would have to charge EVERYone much more to recover our costs. But this is pure Mickey Mouse!
When economic theory and profit maximization collide with basic fairness and empathy for customers, paying high prices, empathy should win. In the long run, it is simply good business. Beware of what economists advise. It is based on math, not on people.