On allexperts.com, we find the following query:
How can I find a list of retail markup % by industry? My husband won’t let me buy new lamps because his mother worked in a lamp store 60 years ago and the markup was “astronomical”. I’m betting that there are plenty of things he buys that have a similar markup as do lamps. I know that the average markup varies between industries (i.e. groceries being very low). Appreciate any insight! Thanks!!!!
Several questions arise, or which the most compelling is: When you buy a lamp, why would you care about the markup, as opposed to, oh, say, the price? In fact, if you’re the sort of person who worries about things like minimizing your carbon footprint and otherwise curbing your resource consumption, you should of course prefer items with high markups, since the markup is the part of the price that doesn’t reflect resource consumption. Or to put this another way: Given the price of the lamp, isn’t it better for the seller to earn more profit rather than less?
Since economic theory tells me that the author of this inquiry is perfectly rational, I see only a small number of possibilities:
- Misanthropy. This is a person who likes consuming as many resources as possible, in order to make the world a grimmer place for the rest of us.
- Long-term thinking. Taking as given the seller’s ability to command a high markup, it’s better to buy the lamp than not to. But buying the lamp gives other sellers an incentive to expend resources on acquiring market power, which we wouldn’t want to encourage.
- Historical perspective. The author of the inquiry is aware that the power to command high markups rarely survives for more than about 60 years. Since the markups in the lamp industry were high sixty years ago, we can expect cheaper lamps in a year or two.
I welcome your alternative theories. Hat tip to Pete Klenow.