Tuesday, December 1, 2009

The Gender Surcharge

The January 2010 Consumer Reports has an article that's sure to provoke some outrage. "Roam any drugstore and you'll see products that seem to be twins, except for one thing: One is for women, the other for men. We discovered that products directed at women—through packaging, description, or name—might cost up to 50 percent more than similar products for men."
For instance, a can of men's Barbasol shaving cream costs $1.69. A skinnier can of the women's version contains less product yet sells for $2.49. Nivea Body Wash for men is $5.49; the same size container of the women's product is $7.49. A four-pack of Schick Quattro razors is $10.49 for men, $10.99 for women. The biggest difference CU found was for Neutragena eye cream, at $9.99 for the gentlemen and $14.99 for the ladies.
Even when prices seem the same, they're not. Both men's and women's Degree antiperspirant cost $3.59 — but the men's version contains 2.7 ounces, v. 2.6 ounces for the women's. And even when products seem to be different, they may not be. Excedrin Menstrual Complete has the same active ingredients, in the same amounts, as the regular Excedrin. But 20 gel caps of Menstrual Complete runs $6.49, v. $5.99 for 20 gels of the regular pain reliever.
The magazine asked the manufacturers to comment. Their explanations ranged from the half-believable (women shave in the shower, so their shaving cream comes in a more expensive rust-resistant can) to the amusingly ingenious (women's Nivea "has skin-sensation technology.")
Psychologists suspect that gender plays a big role in the prices we pay. It is nonetheless tricky to draw conclusions from the shopping aisle, where there are so many variables. Some of the most compelling experiments have used a simple bargaining game, the "ultimatum game." One person is given $10 to split with another. A split might be "I keep $6 and you get $4." Provided the other person agrees, the money is divided as proposed. But should the other person reject the offer, neither gets anything. Think of a vendor in a bazaar setting a price. He want to keep as much profit as possible for himself by naming a high price. But if he demands too high a price, the customers will walk away.
In a typical ultimatum game, the splitter keeps a little more than half of the $10, and the other person OKs the deal. Psychologist and behavioral economist Sara Solnick, now at the University of Vermont, did a clever version of the game focusing on gender. The players sat on opposite sides of a partition and could not see each other. One group learned the first name of their partner and thus knew the partner's gender. Another group never heard names and had no idea whether they were playing with a man or a woman.
The splitters who didn’t know their partner's gender offered an average of $4.68 out of $10. But for those who knew their partner was a man, the average offer was a more generous $4.89. When they knew they were dealing with a woman, the average was only $4.37.
Solnick also had players state the minimum offer they would accept. This minimum was higher when they knew their partner was female. Women got the short end of the stick, no matter which role they played.
It's possible that similar dynamics apply in the supermarket aisle. Women's products may cost more because women are a little less price-sensitive than men. Is that unfair? Maybe, but Solnick's experiment leaves little scope for anyone to feel morally superior. Her subjects were college kids too young to remember a pre-feminist past. They probably would have loudly rejected a sexual double standard, had they been asked. But they had no idea this experiment was "about" gender. Both women and men unconsciously set higher "prices" for female partners.
That underlying psychology poses some difficult challenges to our would-be egalitarian society. What's to be done when people who aren't sexist unknowingly act as if they were? It's a question we'll probably be wrestling with for years to come.
As usual, Consumer Reports has this sensible advice for shoppers: Ignore the gender marketing and buy whatever is cheaper.

Solnick, Sara (2001). "Gender Differences in the Ultimatum Game," Economic Inquiry, April 2001, 39(2): 189-200.


  1. Price discrimination is about charging different prices for different people based on what they value (and what they are willing to pay). Since it is not easy to find what each person is willing to pay marketers resort to other dimensions. Be it gender, age, size, wherewithal to pay - marketers find a way to price discriminate. This is the 3rd degree price discrimination. If marketers can easily separate out the different customers (senior citizens, students ) and can prevent arbitrage they can do this.
    However when it comes to gender based 3rd degree price discrimination it does pose some equality issues that cannot be pushed aside. For instance if the brands charged one price when a woman buys the same product vs. a man buys the same product that is 3rd degree price discrimination and definitely is not ethical.

    But what I see in the story reported is not a 3rd degree blatant gender based price discrimination but a versioning strategy based on 2nd degree price discrimination - define specific versions so customers will self select themselves to the right version. I do no see this as gender based discrimination. As the CR points out, women are welcome to choose the men's version.

  2. Good points — there are many shades of gray in price discrimination.