Tuesday, May 3, 2011

Hedonics, Paper Towels, and Costco

Costco recently changed their Kirkland paper towels.

The old packaging had 1026 square feet of 2-ply paper towels with 80 sheets per roll.

The new packaging has 1026 square feet of 2-ply paper towels with 160 sheets per roll.

In my opinion, this was a slight quality improvement. It is nice to have the option to use a smaller sheet when all you need is a smaller sheet. Over the course of time, I would therefore expect that this option will save me money.

Here's where it gets interesting to me. How much should the government adjust its price based on the quality improvement?

The government conspiracy sites would claim that they should not adjust the price at all. We get the same amount of paper towels!

The government sympathizer sites (if any existed, lol) would claim that they should call it 50% deflation. We get twice as many sheets!

I find myself between the two extremes. Let's assume that the CPI tracked my expenses and mine alone. (It doesn't.) Let's assume that I'd be comfortable with a government employee sifting through my garbage looking at actual paper towel usage. (I wouldn't.) Let's also assume that paper towel prices were not even remotely important to me so that I was free to use as much as I like without even having to think about it. (I don't.)

In this semi-perfect world, if the government found that the new packaging caused me to use 5% less paper towel then I would be completely fine with the government claiming that the new packaging was 5% deflationary. Call it a productivity miracle if you will.

Let's put this another way. If I was at Costco and saw both packages sitting side by side how much more should I rationally pay for the option to tear off smaller sheets? I have seen them side by side and they were the same price. I can tell you first hand that I had no desire to buy the old packaging. I'm not sure how much more I would have paid for the new packaging but it was definitely more than $0.00. Had they priced both perfectly and accounted for all hedonics, I might have stood there 5 minutes trying to make up my mind.

This was the primary risk I was taking when I hoarded paper towels. There was a quality improvement since I first started accumulating them. I locked in a previous standard of living and missed out on a productivity miracle.

Perhaps this also partly explains the allure of gold and silver. There have been no quality improvements in gold and silver. I'm told that's a good thing. Although I owned gold and silver from 2004 to 2006, I'm not exactly convinced that it is though. Perhaps it has something to do with the video games I'm imagining in the distant future. I'm really looking forward to playing them.


Anonymous said...

I like smaller sheets too.


Stagflationary Mark said...


Unfortunately, I won't be using the smaller sheets for quite a few years. I have to use up the larger sheets first!

I also want to point out that I would have no similar hedonics discussion over toilet paper sheets. I have never said to myself, "I really don't need this much. A half-sheet would do it." ;)

The Stall - I Don't Have a Square to Spare

That's one of the funniest Seinfeld scenes ever in my opinion, lol.

Charles Kiting said...

It's all one sheet, it just has 159 perfs instead of 79. I would think the die would have half its calendar life at the factory now.

What we need is a paper towel holder that has a slicer on it (like rolls of foil or plastic wrap) so we can cut to the exact size we need.


foxmarks said...

“Had they priced both perfectly and accounted for all hedonics, I might have stood there 5 minutes trying to make up my mind.”

I have this problem even with existing imperfect pricing.

@Charles: If my hands are covered in chicken guts, operating the slicer means I contaminate another object.

dearieme said...

"I have to use up the larger sheets first!" No; use those as trading sheets.

Stagflationary Mark said...

Charles Kiting,

What we need is a paper towel holder that has a slicer on it (like rolls of foil or plastic wrap) so we can cut to the exact size we need.

I would buy your invention. Seriously.

Stagflationary Mark said...


Perhaps the slicer could be automated. You simply pull the sheet out and as long as you are pulling it doesn't cut. Once you stop, presto!

Stagflationary Mark said...


Things We Didn't See on Mad Max

I'll give you 100 of the larger sheets and 50 of the smaller sheets for a few ounces of that petrol you've got.

Just because we didn't see it doesn't mean it didn't happen. ;)

Charles Kiting said...

I remember maybe 20+ years ago one or two paper towel brands advertising how their sheets were bigger so they were better at cleaning up stuff.

Now we're in a smaller-sheet phase, which makes my invention a harder sell.

All you need is some teeth on this one and then you'll never care how many perfs your paper towel have.