Saturday, January 16, 2016

Of Tuxedos and Wedding Dresses

In a recent EconTalk podcast, Russ Roberts discussed the following puzzle with the guest Robert Frank:

Why do grooms typically rent tuxedos, while brides usually buy their wedding gowns?

As described here:
[Let's begin] with the assumption that women are more likely than men to want to make a fashion statement on big social occasions. It’s a strong assumption. But it’s also a plausible one. I’ve described this example in many different countries, and no one has yet objected. If we grant that assumption, one implication is that a rental company would have to carry a huge stock of distinctive gowns—perhaps forty or fifty in each size, to enable brides to achieve their goal. Because each garment would be rented only infrequently, perhaps just once every four or five years, the company would have to charge its rental customers more than the purchase price of the garment just to cover its costs. But if buying were cheaper than renting, why would anyone rent?

Conditions are markedly different in a rental market for tuxedos. Because grooms are willing to settle for a standard style, a rental company can serve this market with an inventory of only a few tuxedos in each size. So each suit gets rented several times a year, which enables a rental company to cover its costs by charging only a small fraction of the tuxedo’s purchase price.

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