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Ski-Lift Pricing, with Applications to Labor and Other Markets: Reply

American Economic Review 2016
After we wrote our paper on pricing at ski areas (Barro and Romer, 1987), we received several comments like that of Tyler Cowen and Amihai Glazer (1991), noting that our results could be interpreted as special cases of results that have been established in club theory. We also received comments claiming that our results were clearly wrong because they contradicted standard results in club theory. (We now sympathize with the economist who was reportedly told by a critic that your result is trivial, wrong, and I already proved it.) When we wrote our paper, we were aware that ski areas were sometimes mentioned as examples of club goods (see, for example, the paper by Suzanne Scotchmer [1985]). We did not pursue the literature on clubs because our problem contained no club goods. The goods we dealt with, rides up a chair lift, are conventional private goods. Our result also contradicted the one result from club theory that we knew. The standard club analysis of a ski area treats it as a shared facility. Each member in the club decides how intensively to use this facility. In this setting, Eitan Berglas (1976) first showed that both a membership fee and a usage fee are necessary to support an efficient allocation. Our finding was that queues with no usage fee support an efficient allocation. Nevertheless, Cowen and Glazer are correct that our results have much in common with results from club theory. Specifically, our results can be interpreted as special cases of results for clubs that are not subject to variable intensity of usage. There are therefore two interesting questions: why does the analysis of a problem with private goods resemble the analysis of a problem with club goods? and why does our problem resemble a club problem in which people cannot vary how often they use the shared facilities? The answer to both of these questions depends on the observation that it is possible to treat a bundle of private goods as a