Stumbling into 1843 Economics
Over the weekend I found myself perusing the Economist’s “ideas, lifestyle, and culture” magazine, 1843, while my son played with the esteemed Thomas the Train table at Barnes & Nobles. As I was enjoying the publication, I glanced at the cover price: a hefty $10. I realized there were a few longer articles I wouldn’t have time to read right now. With a $10 cover price, surely the articles are not available online for free?
“Oh well, worth a try,” I thought to myself and googled the title of an article. I was surprised to find the full article available with no teasing paywall or partial snippet á la Wall Street Journal. Later that evening I learned there is also an 1843 app which allows you to download the full issues for free. Nice.
This got me curious about the economics of 1843. My immediate hypothesis was the magazine is bundled with and enhances the appeal of a pricey subscription to the Economist proper. However, it appears 1843 is an entirely separate subscription entirely. So scrap that idea.
So why the $10 price of the print edition? An apropos article in the August/September issue refines Thorstien Veblen’s “conspicuous consumption” idea in an examination of the economics of the Birkin handbag and other luxury goods. Might this copy of 1854 I’m holding qualify as a Veblen good? Magazines are often consumed in public signaling the readers’ taste, interests, social status, and erudition. However, unlike a true Veblen good demand for 1854 would likely not increase proportionally with price.
The higher price of single issues versus subscription is a reflection of the relative price-insensitivity (inelasticity) of consumers who buy magazines at airports and bookstores. Just as you are more willing to pay more for popcorn at a movie theater or a hot dog at a sporting event, convenience and availability matter. But hold on — the subscription price of $50/yr is a discount of less than two dollars per issue. So no big convenience premium in this case.
Best to follow Occam’s razor and go with the simplest hypothesis: The cover price positions 1843 alongside other “premium” specialty magazines targeted to consumers happy to pay for differentiated, quality content. This simple hypothesis eluded many perplexed critics of Apple’s meteoric rise “despite” premium prices.
As far as the free content online, I suspect it does enhance the overall brand’s halo effect and as Chris Anderson suggests in his book Free, helps bring in additional paying subscribers. I found the print version a more enjoyable experience than reading the articles on my phone so I see some validity to this approach. Then again, I haven’t subscribed either.
A completely tangential memory struck me in retrospect. Did Barnes & Nobles actually have 1843 in the History section? As you might have intuited, the magazine, formerly known as Intelligent Life, is so-named for the founding date of the Economist. With my mind set on history when I walked in, it was this mistaken sorting that helped 1843 stand out and land into my hands.
