Wednesday, May 28, 2003

Excretory Econ 101

Mary Anne Case’s “toilet survey” (brought to my attention by Gene) got me thinking about the economics of restrooms. Case’s primary research question is why lines for women’s restrooms are so much longer than they are for men’s restrooms – her hypothesis being that it’s *not* because women take longer to go, but because there are more “excreting opportunities” in men’s rooms. But somehow she has missed what jumps out to me as the most obvious question: why are there lines for restrooms at all? In general, queuing is the tell-tale sign of an under-priced product or service, the paradigmatic example being the queues for rent-controlled housing units. And indeed, with the rare exception of pay toilets in certain locations like airports, restrooms are generally free to the user. But why? After all, there is (to my knowledge) no law requiring a price of zero on restroom use. Free toilets seem to be a product of the free market. Naturally, I have some theories.

First theory: timing issues. Since the lines only appear at certain times (e.g., between halves at a football game or during prime-time at a nightclub), there is no need to price them all the time. Eventually, everyone gets to use the restroom, because the waiting time pushes some customers into the more open times (say, when the second half has begun). While this is true, the usual solution for this sort of situation is peak-load pricing: setting different prices at different times of day, such as when a toll road only charges a toll during rush hour. Peak-load restroom pricing would reduce the demand for restroom use during prime hours while increasing revenue for the owner. Such a pricing scheme would also have the salutary effect of allocating precious restroom time to those who value it most. Those who consider the price worth it because they really have to go now would pay; those who can hold it would do so to avoid paying.

Second theory: high transaction costs. Restrooms are generally bundled with other goods and services, such as meals, cocktails, and sporting events. Now, that fact in itself doesn’t explain why they aren’t priced; a restaurant could, in principle, put “toilet use” on its menu like everything else. But there are numerous other items that establishments choose to place in the public domain as well, even though they could in principle charge for them. Restaurants allow customers to use salt and ketchup freely, for instance. Setting a price of zero does lead to some overuse – as customers consume these products until the marginal benefit is zero – but the mild inefficiency from overuse is presumably swamped by the expense of monitoring and charging for each shake of the ketchup bottle. Similarly, the cost of charging for restroom use might be greater than the efficiency gain from superior rationing of toilet time. On the other hand, pay toilet technology is well established and cheap: just put a coin-operated lock on the stall doors.

Third theory: customer annoyance. People regard restroom use as something they *ought* to get for free if they’re paying customers (or for that matter even if they’re not). Any establishment that started charging for restroom use would lose customers who resent having to pay, so it’s more profitable to just charge more for the establishment’s primary products or simply to absorb the cost. This theory strikes me as plausible, if a bit ad hoc, but it relies on a specific factual assumption: that people are more annoyed by having to pay than by having to wait in line when they really have to go. (Some evidence this might be the case: if women really disliked waiting enough that they’d be willing to patronize other establishments, there would be a strong market incentive for expanding the size of women’s restrooms, which does not seem to have occurred.)

I suspect the reality is a combination of all three theories. The gains from toilet pricing only accrue at times when there are significant queues, because only then is it important to make sure those who value the restroom time most get it. Charging during other times would annoy customers without any compensating effect from reduced waiting time for those who need the restroom most. But peak-load pricing involves higher monitoring and enforcement costs, because a simple lock on the stall door can’t discriminate based on time. Plus, for every person gratified by the opportunity to use the restroom faster because she paid, there’s another person annoyed at having to wait because she didn’t pay.

Next: the economic case against unisex restrooms.

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