The Market for Laundry

As a traveler in a foreign country, one of the biggest necessities is doing laundry. After two or three weeks of living out of a suitcase with limited selection, things start to smell. In economic terms, as the trip goes on, our demand for laundry slowly (or quickly for some people) increases and becomes more and more inelastic. For example, our demand curve for laundry after two days in Italy was still fairly elastic but after two weeks and many days spent trekking up the hills of Florence and other cities, our demand for fresh laundry has become far more inelastic. In becoming inelastic, it means that we as smelly travelers, are willing to pay more for the service of cleaning our clothes. We become less responsive to price changes.

This allows for companies that specialize in cleaning laundry (laundry mats) to have more control over the pricing in the laundry market. Because of our “need” to have clean clothes and our lessened responsiveness to price changes, these firms can increase their prices and still expect the consumers to walk through the doors. An example of this occurred a few days ago in Venice when we finally made our way to the laundry mat and discovered that prices were astronomically high. Because of our inelastic demand and our expected willingness to pay at elevated prices, the firm was able to charge €9 for a single wash, €1 additional for soap and upwards of €9 for drying. This was only for a single load, and many of the guys, because of our ginormous stature and thus large clothing, had to pay for more loads and more drying time.

Although some would say the firm was charging too much, it's obvious that they weren't because we were more than willing to pay. Another example of this is the Starbucks analogy: Is Starbucks coffee overpriced? The typical answer from a consumer is that YES, it's too expensive for what it is. However, from an economic point of view, Starbucks isn't overcharging because people are still willing to pay their price in a way that will maximize profits. The same applies to the laundry mat in Venice. They had very high prices BUT because the consumers were perfectly willing to pay their prices, they obviously were not overcharging. They have analyzed their market and named a price that will best maximize their profits while not scaring away customers. However, I will say that paying €30 for laundry is a downer.