This article originally appeared as a part of my regular column at Kjarninn.is. The original article is still available here (in Icelandic). I plan on publishing all my articles here on my blog in English (with some delay). Please forgive any typos as I can only afford so much time on translating the articles.
A while ago I read a news article on a local news site in Iceland. The article complains that women pay more for haircuts than men do. Although it might sound outrageous to price discriminate in this way to some people, there might be simple economic reasons for it. For the rest of this post I will try and shed a light on some of them.
Theory #1: it costs more to cut women.
This is neither a complicated nor a controversial theory. If the market for haircuts is competitive – as it should be – and if time is the main cost of cutting hair, then one would think that the main reason why women pay more than men at the hair-saloon is because it takes longer to cut women than men.
After searching the internet high and low I only managed to find one Icelandic hair-saloon (slippurin.is) that actually lists how long it takes to cut the sexes. According to that site it takes 45 minutes to cut men and 60 minutes to cut women. Or in other words, it takes 33% longer to cut women than men.
At the same saloon the price for a female cut is between 22% and 27% higher than for men. So, based on that – and if time is a key component in determining cost – then it seems that cost of labour almost fully explains the difference.
The saloon also provides a few more data points which seem to support the theory. Another male service available at the saloon is the “haircut plus beard-trim”. This service takes 60 minutes in total to execute – the same amount it takes to cut a female – and we would therefore expect this service to be offered at the same price as the women’s service. As it turns out, this male service is actually slightly more expensive.
Theory 2: Demand is greater amongst women than men.
When firms can easily segment their customers into different groups there is a potential for them to charge different groups different prices. This practice is very common across many markets. Bus fairs in Iceland are one good example: middle aged people pay 3.6 € for a single fair while kids and old people only pay 1.7 €.
It is therefore not unlikely that, if the willingness to pay for the service is higher for women, that hairdressers know that and price their service accordingly. If this is the case then there is nothing immoral about the price difference at all. All the hairdressers are trying to do is to get as much money possible for their service.
The data I managed to collect online do however little to neither support nor rebut this theory. To do so I would need data on the willingness to pay for the different groups (or at the very least number of visitors by gender). But, what is clear by the price lists I found online is that these saloons have a clear view of customer segments. All of them split their customers into:
- men who on average are charged 55.4 €;
- women who are on average charged 69.7 €; and
- children who are on average charged 50 €.
If we assume that women care most about their hair, then men and lastly children then this seems to imply that this theory could explain some of the difference. But given the potential difference in cost mentioned earlier we can not be sure by how much.
Theory 3: women do not pay more at all for haircuts.
This theory is really just an extension of the first theory. Two things seem clear at the saloons from the data I have gathered: (1) women pay more for a single haircut; and (2) on average women spend longer in the chair than men.
Therefore, if the saloon Slippurinn is telling the truth that it takes 60 minutes to cut women and 45 to cut men then it could be that men not only pay as much as women, but more. At least when measured in price per minute in the chair. For example for every minute in the chair men pay on average 1.3 € for a standard haircut at Slippurinn. That is 8%. more than the women are charged. Furthermore, according to this data, not only do men pay more than women but so do kids. At least per minute.
Of course the price difference might also be explained by fixed costs and how they are treated in pricing haircuts. And perhaps there is some variable cost incurred simply by putting someone in the chair to begin with. So, obviously I will not be able to fully explain this here.
There is probably some truth to all the theories.
There is of course a chance that all three theories are true at the same time. Each theory could explain some part of the difference in pricing. It is however hard to determine what explains what in general and having only a sample of four hair saloons makes it impossible to generalise. So while I might not be able to fully explain to you why the prices differ, at least you now know how geeky economists go to the hairdresser.