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  1. #346

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    Re: Should Disney get rid of monthly payments?

    Quote Originally Posted by ravencroft View Post
    This is america and few people consider the total price of anything. Most people only look at the monthly payment. Sad but true.
    I refer to that as HMAM (How Much A Month?). People don't consider the total cost of something (vehicles mainly). They just want to know how much a month.

  2. #347

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    Re: Should Disney get rid of monthly payments?

    Quote Originally Posted by ravencroft View Post
    Do yourself a favor and google "demand elasticity".
    Are AP prices Elastic or Inelastic?


    "A firm considering a price change must know what effect the change in price will have on total revenue. Revenue is simply the product of unit price times quantity.For inelastic goods, an increase in unit price will tend to increase revenue, while a decrease in price will tend to decrease revenue."

    Thus your quote is wrong "And do not forget that pricing/demand relationship is elastic which means that the price can move a certain amount without affecting demand."

    "When the price elasticity of demand for a good is relatively elastic ( -∞ < Ed < -1), the percentage change in quantity demanded is greater than that in price.total revenue falls, and vice versa."

  3. #348

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    Re: Should Disney get rid of monthly payments?

    Quote Originally Posted by ravencroft View Post
    Sorry, but I respectfully disagree. A guest who used to pay the entire AP cost up front now makes monthly payments is financing their cost at 0%.

    Disney pays the "opportunity cost" of that revenue (which with higher interest rates, is substantial, BTW). Quite a large percentage of the AP holders switched to monthly payments. Believe me when I tell you that if Disney could make 3 or 4% (or more) on that money, they would end the monthly payment program so fast it would make your head spin.

    You may want to google "opportunity cost"
    Sorry, the opportunity cost is bore by Disney, not the customer, of the entire sale, not the mere 3 or 4% of the perceived interest payment. Disney can either make the sale or not. If the customer is on the fence on buying an AP outright, they can decide to make the purchase on a monthly plan. Disney either earns the price paid immediately or over 12 months. The 3 or 4% is not even in the picture as it doesn't exist in a real sense.

    For Disney to get the entire amount for a service that isn't realized yet by the customer, it is unearned income. Eventually, most customers just "breakeven" in admissions versus the cost of the AP. If Disney didn't offer the monthly plan, it is most foolish to leave the money on the table just because they think they might get an extra 3 or 4%.
    Last edited by StevenW; 01-23-2014 at 11:38 AM.

  4. #349

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    Re: Should Disney get rid of monthly payments?

    Quote Originally Posted by ravencroft View Post
    And do not forget that pricing/demand relationship is elastic which means that the price can move a certain amount without affecting demand.
    This is incorrect. When something is price elastic, that means a price change DOES affect demand. Luxury cars are price elastic. When something is price INelastic, a change in price has no effect on demand; insulin is price inelastic for those with diabetes.

    A Disneyland AP is price elastic, you're right about that, but your application of elasticity is off. If Disney were to change prices, demand would lower. Perceived value is the reason APs keep getting sold, not price elasticity. For the main target audience of DL, an AP is well within their income-consumption curve still, as evident by the sales they see. When APs are given a monthly payment option, this places an AP further below this line (which is usually sketched per month/when income is received)...therein lies the issue. Elasticity is irrelevant.

  5. #350

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    Re: Should Disney get rid of monthly payments?

    Quote Originally Posted by TylerDurden View Post
    This is incorrect. When something is price elastic, that means a price change DOES affect demand. Luxury cars are price elastic. When something is price INelastic, a change in price has no effect on demand; insulin is price inelastic for those with diabetes.

    A Disneyland AP is price elastic, you're right about that, but your application of elasticity is off. If Disney were to change prices, demand would lower. Perceived value is the reason APs keep getting sold, not price elasticity. For the main target audience of DL, an AP is well within their income-consumption curve still, as evident by the sales they see. When APs are given a monthly payment option, this places an AP further below this line (which is usually sketched per month/when income is received)...therein lies the issue. Elasticity is irrelevant.
    If the premium AP had a cost of $1000 per month or $12,000 per year, Disney would sell fewer of them.

    We have also seen Disney modestly raise the price of the AP and the demand appeared to go up! This supports the argument against price elasticity but you are right that it has nothing to do with price elasticity. It is more to do with: improvements to the property, growing population, improvements in marketing and or factors I don't know. The point is the price went up and the number of buyers went up. So you make a good point.

    I still maintain that monthly payments with no interest are allowed because Disney has no way to make money on that revenue while they are holding it so they might as well let the guests hold the money and they will have more guests and make more money in other ways like selling more churros.
    When Disney can make a decent return on that revenue while they are holding it, they are going to laugh off the churro money and they are going to kill the monthly payment plan.

    So if you hate the monthly payment plan situation, then you should be hoping for higher interest rates..

  6. #351

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    Re: Should Disney get rid of monthly payments?

    Quote Originally Posted by StevenW View Post
    The montly payment plan isn't a interest free loan. It is a subscription service.
    With a magazine subscription service or a cable TV subscription service, you can cancel at any time. This is not the case with the Monthly payment option for Annual Passes. When one chooses the monthly payment option, one agrees to pay for the entire 12 months.

    In my example, I am not including ETFs or Early Termination Fees. These fees are charged for quitting before the end of the agreed term to which the subscriber agreed to do in return for lower pricing.

    Once Interest rates go up, Disney will simply tack on an interest charge to the monthly fees and doing such should cause AP sales to begin to taper off.

  7. #352

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    Re: Should Disney get rid of monthly payments?

    Quote Originally Posted by TylerDurden View Post
    This is incorrect. When something is price elastic, that means a price change DOES affect demand. Luxury cars are price elastic. When something is price INelastic, a change in price has no effect on demand; insulin is price inelastic for those with diabetes.

    ...

    Elasticity is irrelevant.
    1. It is not a binary thing.
    2. Price does not affect demand; it affects the quantity demanded. Non-price-related events change the demand curve (Quantity on the X-axis, Price on the Y-axis).
    (I don't like being pedantic, but I do like using one of my college degrees.)
    Elasticity: when you raise the price, the total revenue drops.
    Inelasticity: when you raise the price, the total revenue rises.

    By how much might be interesting, but moot.

    Seems to me that the DL AP is price-inelastic: they keep raising the price, but not as many AP'ers stop purchasing to counteract the price increase of those who are retained.
    If an AP were the only way to enter DL, Elasticity would be important. However, there are two things more important:
    1. There are other ways to enter.
    2. When the prices increase, it is likely that admission per AP rises, which increases costs to run the park.
    "Here You Leave the World of California Today and Enter the World of, um, er, California Today."

  8. #353

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    Re: Should Disney get rid of monthly payments?

    Quote Originally Posted by sediment View Post
    1. It is not a binary thing.
    2. Price does not affect demand; it affects the quantity demanded. Non-price-related events change the demand curve (Quantity on the X-axis, Price on the Y-axis).
    (I don't like being pedantic, but I do like using one of my college degrees.)
    Elasticity: when you raise the price, the total revenue drops.
    Inelasticity: when you raise the price, the total revenue rises.

    By how much might be interesting, but moot.

    Seems to me that the DL AP is price-inelastic: they keep raising the price, but not as many AP'ers stop purchasing to counteract the price increase of those who are retained.
    If an AP were the only way to enter DL, Elasticity would be important. However, there are two things more important:
    1. There are other ways to enter.
    2. When the prices increase, it is likely that admission per AP rises, which increases costs to run the park.
    Well, nothing in my post really contradicted anything you're saying.......if you want to PM me we can talk in-depth economics, I was just pointing out the basic principles of elasticity with which there seemed to be some confusion earlier.

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