2018-11-08

The Pink Premium

A well-worn social media trope is the concept of the “pink tax,” which is purported to be the higher price women pay for products geared toward women, relative to the male equivalents of the same products.


One classic example of the pink tax is the disposable razor. I checked a well-known online retailer for prices just now and confirmed that a 12-pack of “lady shavers” currently costs $17.16, while a 12-pack of ostensibly gender-neutral but probably male-oriented razors is $8.92. That amounts to a quite significant difference of over eight dollars.


An obvious question to ask at this point, though, is why would any woman pay almost twice as much to use a pink razor, especially considering that the alternative razor is a gender-neutral yellow color? To the extent that women choose to use the higher-priced pink razors, we’d be forced to conclude that the color of the razor really is valuable to them on some level. I’m not here to question women’s collective color preferences. If this is so, then this hardly amounts to being a “pink tax.” Instead, this is an example of how the market economy is capable of discovering preferences that are more valuable to consumers than even the consumers themselves realize.


However, my suspicion is that the majority of women do not prefer the pink razors to the yellow ones. I’d guess a sizable segment of the female, razor-buying population – perhaps even a comfortable majority of that population – just buys the yellow razors at the lower cost and rolls their eyes at the pink ones. (Still, someone must be buying the pink razors, since they’re still being sold.) If my intuition is correct here, then straightforward economic theory can account for the price difference without having to rely on the concept of a pink tax.


One need only reason that there is a lower supply of the pink razors than of the yellow ones. Assuming homogeneous demand for all razors (ie., that the pink and yellow razors really are interchangeable substitutes), then the razors with the lesser supply will intersect the demand curve at a point corresponding to a lesser quantity sold and at a higher price, which is exactly what we observe on the razor market.


This implies that if manufacturers decided to produce more pink razors than yellow razors, the reverse would be true: yellow razors would be more expensive than pink razors. But since pink razors only appeal to a subset of the female, razor-buying population, and since yellow razors appeal to the remainder of the female population, plus the entire male population, yellow razors enjoy greater supply than pink razors, and thus also have a lower price.


In short, the “pink tax” is nothing more than an artifact of the fact that not all women prefer pink, and that those who do prefer pink so much that they are willing to pay for it.