Law of one price

OK, not the “law of one price” you learned in undergrad trade theory. I’m talking about plain old prices at the cashier.

It has long bugged me that the price listed on a sales tag is not the same as the money that comes out of our wallets to complete the transaction. Most of the time it is provincial and federal sales taxes that get tacked on, but air travel is particularly guilty of major extra fees, and the new charges announced by Air Canada will only add to that gap between what is initially advertised and the final price.

This appears to only be an issue in Canada. In other countries, you pay what the price tag says. And so it shoud be here, too. So my law of one price would compel businesses to advertise the final sales price, all costs in, taxes included. They can feel free to show the breakdown of sub-items on the price tag if so desired, but the tag should legally be required to show the final price.

2 comments

  • I have long suspected that the business class prefers the ideological ‘umph’ of the existing system. You think you can afford something then you go to the till and you get the shock of the full price. Where does your anger go? Directly at the two levels of government.

    Imagine the direct opposite case. I suspect to results would follow. First we would all become better at basic maths. Second we would all become more skeptical of retailers instead of government. As far as I am concerned two net welfare gains.

  • “Government Good – Business Bad”
    Isn’t that just a little simplistic ?

    Surely it is just the flip side of:

    “Business Good – Government Bad”, the claptrap we hear all too often from Terence Corcoran, Michael Campbell, Neil Reynolds and the Fraser Institute.

    If everyone who takes business risks is considered an anti-social profiteer, in due course, no one will voluntarily take business risks. And G-d help us all if the only entrepreneur left standing is the government !

    Such a world is no better in my view, than a world in which we have no public goods on offer because their supply is “left to the private sector”.

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