Friday, April 15, 2005

Economist Looks at US Open in Pinehurst

The Price is Right:Three Years in Advance: "How much are you willing to pay for U.S. Open golf championship tickets to Pinehurst this June, plus a place to stay during the event? Some tournament patrons have paid up to $50,000 for a one-week rental house in past years. In the rental housing market, prices for the week are determined strictly by 'what the traffic will bear' -clearly a hefty amount for a premium rental location. Private homeowners can offer rentals for up to two weeks, if they wish, without having to pay tax on rental income they receive during the Open....

...But there's more to price than meets the eye in this case. Local accommodations for the U.S. Open in Pinehurst required as much as three years of advance planning, booking, and waiting time. If reports are correct, 2,700 rooms in Moore County were booked solidly for the 2005 U.S. Open back in 2002. Would-be renters for the event have incurred costs in the form of advance reservations, deposits, and payments in ways that raise price beyond the number of dollars alone involved in the process."

Does waiting really add to the "cost" of an item for the consumer? Yes, though the added costs are mostly opportunity costs, options and opportunities that we miss while we spend time and other resources during the waiting period. Of course, all of the vendors could have eliminated the wait by simply hiking the dollar price of their product. That would eliminate rationing by patience, forethought, or luck, none of which offer a manifestly "better" or more "fair" outcome than simple, efficient money prices.

In markets, those that want the goods immediately can get them, if they offer a price attractive to sellers. And that amounts to plan coordination without the three-year time horizon."

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