Over in the USA they have these things called 'layaway' schemes and Alex Tabarrok thinks it odd that people use them:
Layaway plans are immensely popular, a fact I find deeply puzzling much like the popularity of Justin Bieber, Snooki, and homeopathy makes me question the rationality of my fellow human beings.
The typical layaway plan requires a deposit of 10-15% of the price of the good, say a new TV. If the consumer pays the balance over the following 10-12 weeks (i.e. by Christmas) they can pickup the good. If the consumer doesn’t pay the balance they get a refund of payments made less a service fee.
I suspect that there is some important factors that Alex overlooks here - for many people such schemes are entirely sensible and their use absolutely rational. Alex talks of how Walmart and such won't run out of what people want so that's not a motivation for pre-order but fails to realise the problems of living on a limited income.
For a number of years, Park Food Group - Britain's biggest Christmas hamper company - was a client. We put together direct marketing and agent recruitment programmes. As the Account Planner my job was to try and understand who might buy these hampers (or rather who might act as an agent persuading others to buy) and the reasons why such purchases are made.
In simple terms the incentive is that, on their own, many people in the target market for hampers and Christmas clubs (and indeed for Alex's layaway plans) simply do not trust themselves to save. There are too many pressures in year that lead inevitably to a little dipping into the jar with the Christmas fund meaning that the fund, come Christmas, is depleted and insufficient.
What hamper businesses do is provide an agent to make sure you save (they pop round every week, have a cup of tea and collect the £3.36 or whatever) and a pot you can't access - so no dipping in to pay for school uniform, birthday presents or a treat taking the kids to the zoo. This is what people are buying, not certainty but rather the assurance that someone is helping them make sure they have a great Christmas.
"Tabarrok's Layaway Plan" simply doesn't offer this assurance and therefore does not offer the actual product ('making sure you save') that people think they need.
...
Layaway
plans are immensely popular, a fact I find deeply puzzling much like
the popularity of Justin Bieber, Snooki, and homeopathy makes me
question the rationality of my fellow human beings.
The typical layaway plan requires a deposit of 10-15% of the price of the good, say a new TV. If the consumer pays the balance over the following 10-12 weeks (i.e. by Christmas) they can pickup the good. If the consumer doesn’t pay the balance they get a refund of payments made less a service fee.
- See more at: http://marginalrevolution.com/marginalrevolution/2013/10/stayaway-from-layaway.html#sthash.eTIAonk2.dpuf
The typical layaway plan requires a deposit of 10-15% of the price of the good, say a new TV. If the consumer pays the balance over the following 10-12 weeks (i.e. by Christmas) they can pickup the good. If the consumer doesn’t pay the balance they get a refund of payments made less a service fee.
- See more at: http://marginalrevolution.com/marginalrevolution/2013/10/stayaway-from-layaway.html#sthash.eTIAonk2.dpuf
