Economic Theory on How Much to Charge for Wedding Photography

[jude]

Originally posted by Mokole
Economic profit is the difference in value of the Price and the AVC isn't it?

Marginal cost is a "U" shaped curve, and it only tells you at which point the firm should produce. AVC and ATC are also "U" shaped curves and are at a minimum point where they intersect the MC curve.

What this means is that it is possible for the firm to produce below the optimal point. It does not mean that firms *ACTUALLY* produce where MC = AR = MR = P.

Therefore economic profit is only zero where Average TOTAL Cost is tangent to D = AR = MR = P AND firms produce where MR = MC.

Where Average TOTAL Cost is ABOVE D = AR = MR = P, the firm makes an economic loss. As you have so cleverly pointed out, accoutning profit is ambiguous at all points. It is therefore possible for a firm to make an economic loss and still make possible accounting profits is it not?

As for firms shutting down or leaving the industry, this is dependant upon the firm itself. I agree with you that it is likely that a firm will stay shut down for the short run, and I *DID* say "In such a case, the firms that cannot sustain at a loss will be washed out of the market in the LONG run, and the supply will shift accordingly and raise the price."

Hence my advice to photographers to stick by their guns.

precisely my point! stick by their guns.

 

[jude]

Originally posted by Mokole


When you talk about macro economics, you're dealing with GDP and GNP. Even if you're looking at it from an industry's perspective, it is still micro but at a industry level.


Yeap u are rite on, my mistake


You said it yourself. Real world models rarely fit into a sterotype. The pros could be an exception. GENERALLY speaking, the average joe photographer are price takers.

 

[Bean]

Originally posted by Ian
So lets assume a pretty average professional wedding kit is going to cost around 30K total.

How much demand are there for a pretty average professional wedding kit? Unless I'm filthy rich, I would spend the 30K somewhere else if I even have that $$...

 

[SNAG]

Originally posted by Mokole


It isn't *EXACTLY* homogenous, but how much diffrentiation is there? Skill level may count for something, as does film quality, but in the end most couples will want their picture in print. I doubt most will appreciate the perfect lighting, or the kodak moment. I don't mean to belittle the efforts of photographers, but to the layman it's just a service to be rended with due skill and care.

I think photography services can be differentiated as well....

IMHO, to a couple, they don't just want their weddings to be captured on prints, but they want that "Kodak Moment" - as you said, so that they can remisice about their wedding, years down the road.

It's more of a service when quality comes first before quantity. (Heck, if quantity comes first, any Tom Dick or Harry could just use a P&S and shoot loads and loads of film :bsmilie: )

I'm not sure about this, but what I can think of to make photography services differentiated, assuming that the consumer has perfect knowledge about the different respective types of service:

1) Skill/Reputation in the photographic field - People would pay more to photographers who has better "skills" in photographic techniques, and such, and mostly they are recommended by others thru word of mouth.

Normally, this is dependent on first impressions >
for example, Streetshooter's first good experience with Studio 8 has led him to recommend them to others...... But in fact, there are loads of other rivals that may offer the same quality of services (and maybe at a lower price as well?). - sorry Streetshooter for using you as an example.... :embrass:

People would rather want to patronize studios who have been 'tried and tested', rather than allow their weddings to be the guinea pigs.

2)Image - a more upbeat and trendy shooting studio premises would definitely attract more couples (especially for those young couples who want more trendy shoots, with all those zen-like stuff, and overseas shoots) compared to those 'lok cok' photo studios.

A homogenous product in general can be differentiated by adopting price or non-price strategies as well...
Another example:

Rice is generally a homogenous product, but the various rice firms have differentiated their product via packaging and image (like high quality processed rice blah blah).... leading people to stick by certain brands.

My mom swears by one brand (forgot the brand - they are in the storeroom ;p), as she claims that the rice is exceptionally fragrant and easy to cook - which most probably she is influenced by all those marketing hype.... As I certainly cannot taste the differences between different brands, they are all rice to me though - unless my taste buds are not working, that is.

Just another dishing of my "pan tong shui" comments... :embrass:

 

[Jed]

Whoa. Talk about a long and active thread!

I've managed to read through most of the economics stuff although I left most of mine behind about 6 years ago now... agree with the general gist of what's being said, and my head's too muddled with general things to try to argue a case based on economic theory.

So here's my two cents based on having ploughed the wedding market in two very different cultures. The practical side of things, if you could call it that.

[1] Operating costs for non-professionals are effectively coming down. With digital cameras invading the market at a large extent (look at any recent Clubsnap poll for starters), it means that instead of having film and processing overheads, amateurs with digital cameras can eliminate this altogether. I know the main costs is built into the capital expenditure, and professionals fully take this into account when budgeting. The problem is many amateurs do not even though they should. For them the camera is paid for, so they might as well use it since it's there. The expenditure is not a direct expenditure so to speak, and easier to overlook when you're not working on it full time.

[2] A large number of "non-professionals", by which I mean in terms of service provided and not the amateur/professional distinction, in the market brings the overall expectancy and standard down. There are many non-professionals in Singapore offering standard 4R prints in freebie albums from neighbourhood labs. You wouldn't be caught dead (no one would) over here in the UK doing that. Again this has operating cost issues; it costs me about S$200 to compile a basic album, excluding the one day labour to piece it together.

[3] Other costs. Ian has already brought this up. In theory, professionals should be backed by professional liability insurance. Equipment insurance. Et cetera. Also, the cost of having back up equipment. All this builds up, and many non-professionals go around shooting weddings without some or all of these factors.

It's actually illegal for lawyers to practice without professional liability insurance (at least, it is over here, but I'd be surprised if that wasn't the case in Singapore). As, I would assume, doctors. Bearing in mind the importance of a wedding photographer on that most special of days, it really should be mandatory.

[4] Tax. As Ian has already explained.

Ultimately the market probably is divided enough to support two groups, the budget and the non-budget. This does, to a certain extent, drain the demand for the non-budget photographers' services. I know it's possible to find some economic way to explain that if the budget photographers didn't exist, a good number of couples would just not bother with wedding photographers in the first place. But over here, the budget section doesn't exist (or at least, no where as "budget" as in Singapore), and I'd still say the vast majority of couples find some way to have a paid photographer at their wedding.

 

[Sin]

One thing bugs me here...
why do people assume that photography services are homogenous?

Doesn't photography entail the skill and vision of the photographer? Level of skill, style and etc would constitute product differentiation, wouldn't it?

Haven't done economics for very long liao. And frankly, it really mean sh*t for most of the people living in the real world (as opposed to academia) who are working to put food on table.

Try telling a photographer to "stick to his gun" when his family has not paid rent for months, his ailing mother has no money to see a doctor, his children has not enough food...

Economic theories are developed to explain economic phenomena. And used by politicians to explain why they can't do their fr*gging jobs or deliver on their campaign promises. :devil:

:rbounce: :rbounce: :rbounce:

 

[StreetShooter]

Originally posted by Jed

It's actually illegal for lawyers to practice without professional liability insurance (at least, it is over here, but I'd be surprised if that wasn't the case in Singapore). As, I would assume, doctors.

Well, that may not be strictly true. My understanding is that you are officially strongly encouraged to buy malpractice insurance, but it's not a legal requirement. You can actually practise medicine without insurance, but that would leave your ass fanning in the wind, so to speak.

I think the main point about weddings is this: Most of us plan to get married only once (at least, the last time I checked) and would not likely risk spoiling the occasion just to save a few bucks on the photographer. So a professional is a MUST, and the more established and reliable, the better. So the one with a nice impressive portfolio to show off will win. And hang the expense.

 

[SNAG]

Originally posted by Sin

Try telling a photographer to "stick to his gun" when his family has not paid rent for months, his ailing mother has no money to see a doctor, his children has not enough food...

Economic theories are developed to explain economic phenomena. And used by politicians to explain why they can't do their fr*gging jobs or deliver on their campaign promises. :devil:

:rbounce: :rbounce: :rbounce:

Lol..
Agree with you on this.

Just imagine a economist encouraging a po-po to spend more during a recession to stimulate the economy - she'll call the economist nuts.

But to a economist, this is fundementally true > due to the concept of paradox of thrift, assuming that the assumptions ( of that 1) The economy is not operating at full unM levels, 2) the level of investment is kept constant) are met.

Even my mom scolded me as mad when I used the paradox of thrift concept to justify why I should spend more during this recession... ;p

 

[Darren]

Originally posted by SNAG
Even my mom scolded me as mad when I used the paradox of thrift concept to justify why I should spend more during this recession... ;p

ah .. but u shouldn't have tried to use the paradox argument to justify that DSLR purchase

 

[SNAG]

Originally posted by Darren
ah .. but u shouldn't have tried to use the paradox argument to justify that DSLR purchase

haha...
I still haven't got the cash to go for a DSLR yet....

Anyway, as DSLR is an imported good, if everyone starts getting imported stuff, there would be long term capital outflow... but no choice what, since Singapore is a relatively import-dependent country, as we have no physical resources except human resources....

So please go buy some local brands to support the economy ok? (Are there in the first place?)

Oops, I'm getting a tad OT, so back to the discussion...

 

[lavenderlilz]

Originally posted by Sin
One thing bugs me here...
why do people assume that photography services are homogenous?

Doesn't photography entail the skill and vision of the photographer? Level of skill, style and etc would constitute product differentiation, wouldn't it?

I guess it depends on people's perceived value of the photographs itself.

For some its just a mere record - got photos can already.

While others place importance on the photographer's ability to capture their emotions and expressions at the right time.

 

[ckiang]

Originally posted by lavenderlilz


I guess it depends on people's perceived value of the photographs itself.

For some its just a mere record - got photos can already.

While others place importance on the photographer's ability to capture their emotions and expressions at the right time.

Thing is, if they just want "a mere record", they can just get anybody with a camera to do it, for a much lower cost, or even free.

Regards
CK

 

[Sin]

IIRC, economic theory commonly makes assumptions such as "ceteris parabus"(sp) and that consumers have perfect information before they make their decisions?

Well, in the real world, no consumer has perfect information (he can't look at all portfolios in details, nor is the portfolio an infallible way to compare the skills of different photogs, plus a host of other factors...).

Nor is the real world "ceteris parabus".

nuff said

 

[SNAG]

Originally posted by Sin
IIRC, economic theory commonly makes assumptions such as "ceteris parabus"(sp) and that consumers have perfect information before they make their decisions?

Well, in the real world, no consumer has perfect information (he can't look at all portfolios in details, nor is the portfolio an infallible way to compare the skills of different photogs, plus a host of other factors...).

Nor is the real world "ceteris parabus".

nuff said

true, with all those assumptions (and some of them are totally impossible) associated with these theories, they cannot accurately reflect on the situation that we are looking at now....

But does that mean that economic theory cannot seek to analyse this situation, to a certain extent? If that's the case, why bother to study economics?

IMHO, economics seeks to provide a general explanation of a particular situation using certain theories, although flawed (mainly through the limitations of those assumptions). That's where those true-blue economists consider about those tangible and intangible factors and then add in into the big picture to give a overall conclusion. Theories are not those "one size fit all" explanations...

I can feel the heat coming up from my butt... :rbounce:
Peace!

 

[Jed]

Originally posted by StreetShooter
My understanding is that you are officially strongly encouraged to buy malpractice insurance, but it's not a legal requirement. You can actually practise medicine without insurance, but that would leave your ass fanning in the wind, so to speak.

Might well be the case in Singapore, but I would be seriously surprised. The issue is not so much the professional taking the risk, the issue is the state taking the risk off the client.

That's why car insurance is also mandatory (at least, it is over here). Because when you knock someone over and seriously injure them, the idea is to protect the person injured, to make sure the driver is insured and therefore can pay medical and personal injury claims. Otherwise the pauper declares bankruptcy, leaving the poor victim with broken bones, internal injuries, and no where to seek compensation from.

The same theory goes with lawyers and their clients, and doctors and their clients.

But like I said, I don't know the situation for sure in Singapore, but the public benefit is very strong for making it compulsory.