Ethics Quiz: The Marriage Mark-Up

Wedding reception

The New York Times published a feature in December exposing how hotels and wedding service vendors typically charge more to couples planning wedding festivities than they do to corporations seeking the same facilities and the same services. Is the result of  gauging, market forces, negotiation inexperience by the happy couple, or something else? Is it unethical?

The article seems to conclude that the vendors are simply taking advantage of purchasers who have no sensitivity to price, especially so-called “Bridezillas.” They want what they want for their perfect day, and will pay whatever it will cost to get it. Are the venders being unethical to take advantage of what is an emotional rather than a rational mindset? After considering whether more price transparency in the wedding industry would help (the author thinks not), the piece concludes,

“Strong consumer preferences — about the flower type, bridesmaid dress, cake decorations, music style, whatever — mean less price sensitivity (what economists refer to as greater demand inelasticity). If the cocktail napkins must be blue, the happy couple will be willing to pay more for blue. So if there are enough brides out there with strong and specific preferences, who want their weddings to be the special day they always dreamed of, that’s going to push equilibrium prices higher, no matter how transparently they are displayed. In other words, the Bridezillas keep prices high for the rest of us.”

I think how you feel about this situation says a lot about whether you think capitalism is fair or inherently unethical. Should a merchant, faced with a one-time customer who seems determined to pay whatever is asked for a wedding extravaganza, be ethically obligated to ask for a more reasonable price when he knows he can get more? Why? If the couple thinks the price is fair for what they just have to have, why should it be the merchant’s duty to prevent them from over-spending? They can compare prices, and they can walk away from a deal they don’t like. Isn’t this a pure “let the buyer beware” situation?

In some ways, the issue reminds me of the annual debate over the free agent signings of baseball free agents, a process that is underway now. If a team just has to have a certain player, who is regarded as a unique commodity, whether or not it is rational or good business for the team’s management to believe that, the player and his agent have tremendous leverage. If they ask for, say, 20 million dollars a year and the team agrees, can the resulting absurdly inflated contract be blamed on the player? Is the player unethical for “demanding” an excessive salary, if the team says yes to it? If not, how is that different from a venue or a caterer that a bride just has to have taking full advantage of that disadvantageous and foolish negotiation stance? (Bias alert: I think the amount of money couples pay for flamboyant (and often tasteless) weddings, especially couples who will immediately need that money for other, more practical things, is cultural insanity. I also think that this phenomenon is completely controllable by means less damaging than Big Brother saving people from their own stupidity.)

Vendors and hotels, on the other hand, have a different explanation. They will say that, unlike corporations that give them repeat business and that work with them on a professional basis, serving the desires of the soon-to-be wed is more expensive for them—more time consuming, more aggravating, taking up more staff and staff time and being constantly subject to last minute changes.

Your Ethics Alarms Ethics Question Of The Week is…

Is it unethical for the vendors of wedding venues and services to charge couples more than they do other customers?

_____________________

Pointer: Freakonomics

Facts: New York Times

Graphic: Wedding Wire

 

36 thoughts on “Ethics Quiz: The Marriage Mark-Up

  1. Unsurprisingly, I don’t think it is unethical, and not merely because of the “what the market can bear” aspect.

    Weddings are far more involved than probably any corporate function, with multiple outside vendors being involved. If Microsoft uses a large hall, they probably use that location’s catering services, decorations, etc, while a wedding will have a caterer, a cake designer, band or DJ, florist, and on an on. Add in the likelihood of changes at the last minute, or the hassle of a bride constantly seeking updates and any number of minor changes, and you have to some degree an added cost.

    Plus, if a corporation reserves a hall, the odds that hall will be used is likely almost 100% (baring freak weather and the like). Weddings, however, can and do get canceled, and that is a cost to the venue as well (deposits might not be refundable, but the final bill may not happen).

    Charge them what they are willing to pay, I say.

    • Ab:
      You left out a major cost differentiator as well – the opportunity costs. As you pointed out the corporation will contract with the venue to provide a variety of services. Each has a different service has a revenue, cost and profit expectation. If the venue only provides locational preferences it loses its ability to earn a profit on the catering, music etc. Thus, if a top tier facility is allowing third parties to earn profits that they themselves would have earned. Thus, they are creating uncompensated value for the third party vendors and not just the wedding party. Someone has to pay for that.

      Consider a person getting a car repaired. If the customer shops the parts to get the lowest price and then brings them to a mechanic, the mechanic loses the ability to earn a higher gross profit margin – in the same amount of time committed of its personnel and facility. It stands to reason that the facility must charge a higher labor rate to make up for the lost profit on the parts.

      What many do not realize is that most of that “profit” is not net profit as it is used to defray the fixed costs of venue.

      Another factor to consider is the Consumer Surplus – the difference between what they are willing to pay and what they have to pay. Assuming we have multiple consumers (buyers) with different demand preferences, then irrespective of what price is charged, if the market clears at an equilibrium price then some consumers are getting a surplus of value.

      Perhaps maybe the real question is should be; Is it ethical for those with “wedding dream boards” to demand that the costs of their unrealistic dreams be imposed on parents who are then forced to choose between making their little girl’s dreams come true and their own wants and needs?

  2. It’s price discrimination.

    So are coupons, one-day-only sales, and all the other mechanism that charge more money to the market segment that will pay it.

    In its rawest form price discrimination outrages people’s intuitions about fairness. Economic theory, on the other hand, says it enhances economic efficiency and makes otherwise impossible useful transactions happen.

    Imagine an all-coach airline flight. There are only enough full-fare passengers to fill half the plane. That’s not enough to cover the airline’s costs, so the plane doesn’t go if it’s full fare for all. At a discount fare, the airline can fill all the seats but not have enough revenue altogether. The plane still doesn’t go.

    If the airline charges half the passengers full fare and tops up their revenue with discount passengers, the plane flies. The passengers get where they’re going, the airline makes money, and everyone’s better off. They’re also steamed that the person sitting next to them paid less for the identical service.

    Is that consequentialism? If the means are unethical, the results don’t justify them. On the other hand, the price discrimination is the outgrowth of economic freedom, which many have argued is an ethical principle.

    If the hotel publishes a price list and everybody’s informed, I vote “ethical”.

  3. Regarding the ethics of capitalism, one twist is the principle (observed in principle, but not always in practice) that everything should be directed toward its highest valued use. The market is presumed to reveal that highest valued use.

    Consider that, say, a hotel has a limited amount of space and, obviously, a limited number of time slots for events. If a couple getting married values that time slot and space more than a corporation would for a marketing event, then what they’re willing to pay matters more than what a corporation would be willing to pay. (The corporation may have much more flexibility in its choice of venue, and may not care where its event happens.)

    Of course, the ethical quandary here could best be described by an apocryphal, but still interesting, example:

    Indians selling the island of Manhattan to the Dutch in exchange for a box of beads.

    The Indians clearly were happy to part with Manhattan for that box of beads. The Dutch knew they were getting a really good deal — but they didn’t know how good a deal they were getting. (Although I’m not sure they actually got it since it’s now New York rather than New Amsterdam.)

    I guess it could boil it down to a seller’s obligation to disclose his or her cost/price differential. What is that? I don’t know.

    Two days ago, I dropped some shirts off at the dry cleaners. My mother asked me to drop off a blouse for her, which I did.

    The charge was 99 cents for each of my shirts. And $2.37 for my mother’s blouse. That bugs me because there was no cost differential between cleaning, starching, and pressing a man’s shirt vs. a woman’s shirt. The differential was purely in what they thought I’d be willing to pay vs. what she’d be willing to pay. And, actually, I wouldn’t have had a problem with paying $2.37 per shirt.

    How to resolve that? I really don’t know, but it’s a fascinating question.

    • “That bugs me because there was no cost differential between cleaning, starching, and pressing a man’s shirt vs. a woman’s shirt” — This is not true, as you would discover if you ever pressed a woman’s shirt. Because women have curves, so do their blouses. You can’t just stick them in a pressing machine or the front gets all sorts of nasty creases in them. You have to hand-iron them, hence the higher cost. This is not true of pants, and at my dry cleaners, there isn’t any cost differential between men’s and women’s pants, only men’s and women’s shirts.

  4. No, not unethical. I’m a semi-pro musician; my band typically charges at least four times the price of a bar gig to do a wedding.

    Weddings are a LOT more work. Start with interfacing with the bride, her family or a wedding planner. You end up doing that a LOT. Sometimes, they’re delightful, and sometimes, they’re horrible. But you don’t find out which until after the contract has been signed.

    Weddings can require a band to set up in two different places – where the ceremony is, and where the reception is. Depending on the wedding, that can mean two reps of two load-in – load-out.

    Weddings invariably want specific music. If we already know it, great – but if we don’t, we have to learn it, arrange it and practice the hell out of it so that it meets the bride’s expectations. Haven’t done a wedding yet that didn’t require us to learn at least two songs, and each song a couple wants us to learn is probably five to ten hours of individual practice time and another two or three of the band’s time to arrange and get down. And the whole performance must be as close to perfect as possible.

    Bar gigs? You just show up, plug in and play.

    • Your explanation directly attributes higher price to clearly identifiable Direct Costs to a client. The burden created by your analogy is to identify what additional direct costs reception venues incur related to weddings compared to direct costs incurred related to corporate meetings or conventions

  5. Would it be unethical if I contacted a hotel to rent a space for 100 people and tell them that it was a black tie corporate party? I’d let them know that it would run for about 4 hours and that there would be dancing. I’d hire the DJ, pay for the hotel’s catering (including dessert table) BUT show up in a white dress and veil?

      • The hotel will ask the purpose of the event obviously. I think you would have to lie to pull it off. Lying is unethical, but there are those brides out there (I was one of them) who truly don’t care about the details, so it bothers me that I might have paid more for the SAME party because I was wearing a white dress. My instructions at the time were to make sure there was plenty of food and booze and that we would supply the DJ. They kept asking me the craziest questions, and my answer to each and every question was “I don’t care. Just make it nice.” After a handful of inane questions, I stopped them completely.

        • Better yet, approach the venue as a business person and inquire about pricing for a corporate event. Then come back with your wedding proposal and raise hell when they quote a jacked up price.

          Everything is negotiable.

          • Alternatively, get in touch with the person who takes care of the facilities rental for your company’s events, ask them for a recommendation of a place to rent, and then ask them to introduce you to the person they deal with. That person may hand you off to the sales person who handles weddings, but they’ll also mention that you’re connected to a regular business client. Not as aggressive, but it helps.

    • What AMS said. If they’re charging extra for some service they provide for a wedding, then you may not get that service if they don’t know it’s a wedding (which may well be fine with you). If you are simply not choosing to give them information that they could use in bargaining- well, that’s why it’s called bargaining.

      • I would love to see them argue that I should pay more just because I got married earlier that day if I wasn’t asking for extra services though. The more I think about this, I’m leaning toward unethical. The service that the hotel is providing is a space and food — that charge remains constant.

        • It also matters, I would assume, when the weddings are happening as opposed to the corporate events.

          I mean, which is happening on the weekend? There are fewer of those than week nights, so a premium can reasonably be placed on the time slot.

          No one thinks it it unethical for a hotel to charge more over a weekend, right?

        • Not just providing space and food. They are providing *perceived value*. The perceived value to a bride is tons more than to a company, therefore to attract corporate business, prices are lowered. This is viewed from the wrong angle, the real question to ask is why do hotels keep the price so low for corporations? I’d submit that when push comes to shove, corporations would just use their own facilities if price of external gatherings got too high.

          If we must attribute blame for this phenomenon, look to the still young wedding industry, the ‘cult’ of the wedding, and pop culture that has built up expectations of what weddings are supposed to be.

        • I don’t think it’s unethical for them either- as long as they don’t lie about what they provide, that is. I suppose if you asked for a list of what they charged and they gave incorrect info to make it look like a better deal, or something like that, it’s wrong too- but if you walk up and say “I want to book a wedding” and they quote you “$X” and the guy who came in right before you said he wanted to book a corporate award dinner and got quoted $Y, that just means that they assessed two different starting points for haggling based on the cut of your respective jibs.

  6. I see the pointer is Freakonomics. I tried to make that a secondary or tertiary blog to follow, but I really lost interest by the lack of depth in their articles as well as some of their conclusions/hypothesis. I often found follow on commenters to be even more thoughtful and enlightened than their posts.

    I wouldn’t doubt that they didn’t research this phenomenon in depth to determine exactly what venues consider to be direct costs, overhead and risk assumption with weddings vs the same with corporate gatherings. Then compared that with the fact that although the bare bones service appears to be the same, were comparing two separate markets with separate value propositions that mostly compete internally and only on occasion compete with each other in the case of seeking a venue.

    • The more I think about it the more I wonder exactly how stringently the two types of transactions were compared. Depending on what specific services were requested as well as overall expected attendance could change everything.

  7. I think the default expectations for a wedding are greater: flowers, centerpieces, custom napkins, etc. Corporate events may have branded napkins, and posters, but use mostly use whatever the hotel supplies, thus being in fact cheaper overall. Add to that discounts for repeat business for certain companies (or the possibility of future referrals), it would make sense that it is businesses get charged significantly less.

    It all boils down to negotiations. If the couple is willing to accept a less custom wedding, and shop around for a hotel that will give them the desired rate, then they can get it cheaply. If they insist on a certain venue and micromanaging, then they must pay for the privilege. No body works for free.

  8. “I think how you feel about this situation says a lot about whether you think capitalism is fair or inherently unethical.”

    I think that is an unanswerable question. I think capitalism, certainly free market capitalism is the most ethical economic system in practice, because it allows autonomous behavior by the individual members; but it does not guarantee the individuals will behave ethically. Any other system that involves compulsion and collectivization cannot be said to be ethical, because compelling ethical behavior doesn’t make ethical people, only forced people.

    I think capitalism, especially free market capitalism enables people to behave MORE ethically or MORE unethically than other systems allow.

    • Wayne, if you’re referring to weddings of gay guys, you haven’t checked out the sNob Hill hotels’ events lately. They’re setting a new high for fancy and $$$$.

      Personally, I found the judge’s chambers in D.C. claustrophobic, but the progressive-dinner Hallowe’en bash afterwards went through four Georgetown homes, lasted 20 hours and didn’t cost much for anybody. But that was the 60s.

  9. No, it is not unethical, even IF the corporate event and the wedding share the exact same seating arrangements, floral arrangements, eating arrangements, etc.

    Now, I do not believe that a corporate event and a wedding are going to be exactly the same with the exception of who stands in the front of the room. But let’s just assume for a second that they are. Someone planning a corporate event likely is flexible on both time and location. A wedding party will likely want either a specific date or a specific location (if not both). So an event hall seeking to book that corporate event is likely to need to cut some costs to woo the company to prevent it from going to some other place. They also may be willing to give a discount based on the flexibility of the clinet.

    Furthermore, dealign with a corporate event is likely to be less troublesome and risky as dealing with a wedding party. Wedding parties typically demand perfection. This means getting your best staff on the case. There is also the risk that if you do fail in providing the best wedding possible that the couple may then advertise to the world about how awful the establishment was (regardless of how valid those claims are). A corporation is less likely to be breathing down your neck and taking up all of your time with as many questions as a couple planning a party might be.

    So for the added risk and hassle a business takes on in running a wedding and making sure it comes off perfectly, it is reasonable to charge more.

  10. (Bias alert: I think the amount of money couples pay for flamboyant (and often tasteless) weddings, especially couples who will immediately need that money for other, more practical things, is cultural insanity.
    *************
    I feel the same way.
    That’s probably why I can’t come up with an opinion on this one.

    • The individuals who are skewing the entire industry are those on the demand side, whose own prioritization of values is off (according to us), but who are we to judge that?

      • The individuals who are skewing the entire industry are those on the demand side, whose own prioritization of values is off (according to us), but who are we to judge that?
        *********
        Well, we shouldn’t be judging.
        But because I find some of their actions ridiculous, being human, I do make a judgement and then can’t feel bad about them being gouged by a vendor.

        Someone wise (can’t recall who) once said, “If only they put as much effort into the marriage as they put into the wedding, there would be a lot less divorce.”
        That’s true.

        Not too long ago I came across a story on AOL news, meant for young women planning their weddings, about what to do if you suddenly realize that you are marrying a person you never loved.
        And believe it or not, the suggestions weren’t “call it off immediately”.
        Now call me an old bat, but I always thought that was the one non-negotiable prerequisite for tying the knot – love.
        Not so today.

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