Abolish the Gender-Based 'Pink Tax'?

SMITH BRAIN TRUST — P.K. Kannan acquiesced, like a typical parent and consumer, each time one of his daughters learned to ride a bicycle and requested her own pink model. Similar bikes of other colors were lower priced, but try explaining that to a child. "When you shop for a special design or a pink color, you signal to the manufacturer a willingness to pay more," says Kannan, the Ralph J. Tyser Professor of Marketing Science in the University of Maryland’s Robert H. Smith School of Business. "So they take advantage."

Some, including California lawmakers, say this dynamic represents gender price discrimination or a “pink tax.” The state senate there recently approved a bill that would prohibit businesses from charging customers different prices for substantially similar goods on the basis of gender. “Substantially” in this case means “of the same brand, same functional components and sharing 90 percent of the same materials or ingredients.”

A recent Los Angeles Times piece exploring the debate calls out Target for selling a pink scooter for $49.99 alongside the same, but red-colored item for $29.99. In another case, a manufacturer is cited for selling 12-packs of pink razors for $12.99 next to the same razors — except blue — for $7.99. Proponents of the bill also point to a New York City Department of Consumer Affairs 2015 study, which found that women’s products cost more than men’s products about 42 percent of the time.

While debate ensues on whether and how to legislate and enforce compliance, consumer activism can organically correct the market, Kannan says. This is because perception trumps reality when producers set prices. But it can cut both ways and in the buyer’s favor.

Women may be overlooking the razor price discrepancy because they assume the pink product is customized for them, Kannan says. “This raises the pink razors’ perceived value. But the same perceived value lowers when the same consumers compare prices of similar goods and choose the lower price, instead of the color.”

An exception, he says, is usefully addressed, for example, by an existing California law that prohibits gender-based price discrimination for services such as haircuts, alterations and dry cleaning “because market forces are less apt to correct overpricing of these services that target women when the given store operates as a local monopoly.”

“Otherwise, the very fact we’re talking about ‘gender price discrimination’ affecting goods (apart from the aforementioned services) can lead consumers to take matters into their own hands and make sure they’re not paying more than they should,” Kannan says. “Gender pricing disparities would go away slowly but surely.” And, there’s a wildcard to accelerate such correction: Brands differentiating themselves as “anti-pink tax.”

“Factors like the debate in California can generate consumer activism sufficient to prompt producers to differentiate themselves and take a market share from their ‘gender-price-discriminating’ competitors,” Kannan says. “That’s if the market runs its course.”