Last week’s Western Telegraph had an editorial on the vexed question of fining parents who take their children out of school for holidays during term time.
“Regulations to stop travel operators puffing up prices during school holidays, rather than punishing families who honestly can’t afford the extra cash needs considering.”
While I’m sure this is a popular view, it is not on all fours with economic reality.
Travel operators charge more in the school holidays because demand exceeds supply, just as they have to drop their prices during term time when supply exceeds demand.
This is a problem linked to what economists call “elasticity” – the degree to which supply and demand respond to the price signal.
In the case of holiday accommodation there is “inelasticity” of both supply and demand because the quantity of hotel rooms/holiday cottages can’t easily be increased to meet seasonal demand and fixed school holiday periods make the situation worse because most of the demand is crammed into a limited time-frame.
It is different for purveyors of ice cream who can quickly ramp up production during a hot spell and cut it down in the middle of winter.
And it is not just “travel operators” who suffer from this problem.
As part of my research, I visited the website of Coastal Cottages where I found that, for a week in January, a holiday cottage in Brynberian (sleeps 7 – all mod cons) can be had for just £341 while in early June it costs £536 and in late July (school hols) £859.
I’m sure that the owners of this cottage would much prefer to let it year-round at £400 per week because I doubt there are many takers in January even at the knock down price of £341.
And readers of the Western Telegraph don’t have to look beyond the first page to experience a case of inelasticity of supply.
From my experience in newspapers, I know that an advert on the front page will cost at least twice as much as one in the run of the paper.
That is because the amount of space on the front page is limited and there are a lot of businesses who want to advertise their wares in this prime position i.e. in terms of supply and demand, the situation is almost identical to that which affects the price of accommodation during school holidays.
The same applies to what are known in the newspaper business as “early right-hand pages” – 3, 5, 7 and 9 – which, because they are more likely to be seen by readers, also sell at a premium.
Of course the situation is rather different if the supplier has a monopoly and the consumer is obliged to purchase the service as is the case with certain public notices which local authorities have a statutory duty to publish “in a newspaper circulating in the area”.
Some years ago, Cllr Tony Wilcox put down a notice of motion on this subject with regard to the Western Telegraph.
The officer’s report to members stated that the WT was the only newspaper with a county-wide circulation (circulating in the area) and that:
“Newspapers charge differential rates for different types of advertising and it has always been the case that the most expensive rate is for Public Notices.
Newspaper proprietors are aware that all local authorities have a statutory duty to publish Public Notices in relation to a range of their activities.
The law of supply and demand applies and there tends to be a premium of around 50% for Public Notices.”
Of course, anyone who has ever read an economic textbook knows that this is nothing whatsoever to do with the law of supply and demand because there is no shortage of paper, ink, or space in the depths of the paper where these public notices are published.
Indeed, this is about as clear a case of abuse of monopoly as you could wish to find.
And I should point out that “monopoly” in this context refers to someone in “a dominant market position” which doesn’t require they sell every last newspaper in Pembrokeshire as the same report suggested.
And, while the Western Telegraph calls for travel operators’ pricing to be regulated, it should be noted that regulations governing this sort of monopolistic pricing already exist in Section 18 of the Competition Act 1998.
Another point which is worth considering is that newspaper advertising is sold by the column/centimetre and, while the Western Telegraph’s news pages typically have six columns, the pages where these public notices appear have nine, which, as the mathematicians among you will already have worked out, means there are 50% more chargeable column/centimetres per page, and the more columns you can cram onto a page the more you can charge without increasing your rates.
The other consideration is that advertising rates are tied to circulation and my researches at the county archives reveal that, according to the Audit Bureau of Circulation (ABC), in 1995 the WT was selling 29,566 copies per week.
By 2010 this had fallen by 4,758 (16%) to 24,808.
This information was published on the front page of the newspaper.
Unfortunately, I cannot find the corresponding figure in this week’s paper.
This could mean that, for whatever reason, the WT no longer feels it appropriate to publish this information, though I can’t rule out the possibility that my failure to locate it supports Grumpette’s theory that, when it come to looking for things, men are useless.
However, I suspect that the true figure is not much above 20,000 and I wonder if the Western Telegraph has adjusted its advertising rates to reflect its reduced reach?
As Mark Twain said: “Never ask a question unless you already know the answer”.
Unfortunately, “inelasticity” of supply and demand provide a serious challenge to the smooth workings of free market.
In the case of school holidays partial relief might be provided by staggering school holidays – increasing elasticity of both supply and demand.
As I hope I have shown, with public notices elasticity is not the problem and now that we have two newspapers circulating in the area – WT and Pembrokeshire Herald – we can surely rely on market forces to arrive at a competitive price.
During my trip to the county archives, I came across an editorial in the Western Telegraph of May 24 1995 – the week after Pembrokeshire County Council had its first meeting following reorganisation:
The first outing of Pembrokeshire County Council took place, when, as expected, political groupings were announced by Labour, Liberal Democrats and Plaid Cymru.
What was less expected was the decision of the Independents to band together.
This may have been a defence mechanism, but seems strangely at odds with the term “independent”.
Like it or not, Pembrokeshire is to suffer the tyranny of party politics with all the debates taking place at party meetings not open to the public and press.
By default, the Conservatives have become the odd ones out and should now declare themselves openly under their own party colours.
The proposed declarations of interests may well “out” the closet Tories in any case.
Then we may have some idea who are the real “independents”.
With 12 members of the county council currently “not affiliated to any group” we now have a better idea who are the true independents, but the great psephological mystery remains: Why is it that the Conservatives, who hold all four of Pembrokeshire’s national seats (two AMs and two MPs), could win only three seats at the 2012 local elections compared to Labour (9) and Plaid (5)?
Rather a crowded closet, I would say.