Undercover Economist

Cheap tricks – Undercover Economist

There are, of course, two types of price: the ones you see coming and the ones you don’t. I write this from an inexpensive hotel room, but you would not guess that from the price list in front of me. ₤1 a minute for phone calls (price on planet earth: 5p); ₤10 for a day’s wireless access (earth price: ₤10 a month); ₤2 for a chocolate bar. It’s like being in a bizarre alternate universe. If I’d known that the hotel was going to try to pick my pocket I might have considered somewhere that cost a little more up front and charged terrestrial prices for all the add-ons.

Perhaps, however, these hidden extras aren’t quite so bad. In fact, I think the world might be more expensive – and more unfair – without them. If that seems counterintuitive, it’s because we tend to assume that the alternative to hidden charges is no charges at all.

That seems unlikely. The hotel room is fairly cheap because the hotel wants to get me through the door, hoping that I’ll spend more on the phone and the minibar than I will on the room itself. The more incontinent my spending habits, the more it is worth having me as a guest and the lower the advertised price will fall. The logical extreme is the complimentary VIP suite in Las Vegas for the high-rolling gambler…

Continued at ft.com, subscription free.