The American Discount

I just got back from a 2.5-week vacation to Italy. It was amazing.

I’ll spare you the burden of hundreds of photos, so you’ll just have to take my word for it.

Our time in Italy began when we arrived at the airport in Rome. We were warned by some friends not to take taxis offered by guys in the airport, despite the fact that they all had official looking badges.

“They’ll rip you off,” we were told. Still, we needed to get from the airport to the train station, and we didn’t have a plan to do it.

We priced the train, which was 13 euros per person, and there were five of us. A taxi would be faster and comparably priced, we thought.

On the way to the taxi line, we were intercepted by one of those people we were told to avoid, and quoted a price of 15 euro per person. Seems reasonable. But then we remembered we were warned against this, so we turned him down.

We went outside, away from the predators searching for unsuspecting tourists, and waited in the taxi queue. There we found our taxi driver, Max, who also quoted 15 euro per person to take us to the train station.

It turns out the predators weren’t so predatory.

My father-in-law commented that a per-person fee didn’t make sense, because it doesn’t cost the taxi driver more to take more people. Yes and no.

The taxi driver spends the same amount of time taking 1 or 10 people to the same destination. That’s true. The variable cost is the amount of gas and wear-and-tear on his car to take more people. But that’s all beside the point.

The real point here is that, on average, 5 people collectively value a ride more than 1 person does. The taxi drivers charge per person because they can, and they should. We happily paid it. We jokingly began to refer to this value pricing as “The American Discount,” assuming they didn’t charge Italians the same way.

No matter what it costs to deliver, your pricing (and your confidence in your pricing) should be a reflection of the value you deliver to your clients.