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Old February 18th, 2004, 04:51 PM
Steve Lackey
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Default JFK Airtrain: Good News, Bad News, Good News and Bad News

It is kinda a funny use of the word subsidize. But the posters point
is that the walk up guy benefits from the parking lot, whether
he parks or not. The store is able to deliver the products they
have at the price they do because of all of them SUV driving customers.
If they had to rely upon walk up business only, the selection would
be narrower, and the prices higher. As such, the pedestrian customer
has an interest in bearing the same burden for the parking lot cost
of business as the folks who actually park there.


You mean the big box stores that have low prices because of the
economy of scale involved in selling to people who fill the back end
of their SUVs and minivans with a pallet worth of stuff are subsidizing
the walk up customer who just buys what he can put in his little
urban shopping cart? I mean, in one transaction, the SUV guy probably
spends in the $100-200 range for month supplies of stuff, while the
walkup guy likely spends in the $50 range for a week or two worth
of stuff at a higher unit cost than the SUV guy. Plus, he takes up the
same amount of "store resources" to make his purchase, in terms of
space and employee time to process his transaction, assuming it takes
the same amount of time to scan a barcode whether its a single roll
of paper towels or the 12-pack, so he probably makes 3-4 visits in a
month instead of one.

OTOH, the store makes more profit off the walkup guy in a shopping cart.
I guess someone would argue that the walkup guy is subsidizing the SUV
guy, but I'd suspect the whole thing is close to a wash.

There's an old story about a guy who makes leather purses. He
gets leather from cows that are being slaughtered for food. If he
doesn't make purses out of them, the leather is discarded. So he
gets a pretty good price for the leather. The accusation is that
the steak eaters are subsidizing the purse buyers. Then his purses
get so popular that the purse buyers become an excuse to
slaughter the cow, whether the meat is needed or not. So the price
of cow meat drops. Now the purse customers claim to be subsidizing
the meat eaters. But it's easy to understand how some folks see it
that way. But really no one is subsidizing anyone since they'd
all be buying meat or purses regardless. They do have a symbiotic
relationship however.


This is a pretty smart example, though the point where leather demand
exceeds corresponding beef demand, the input price changes
dramatically. Haven't sat in an econ class in better than 10 years, but
my guess is that the purse buyers would technically be correct only if
their purse price rises.