Why does air conditioning cost twice as much?

Air conditioned taxis in Mumbai cost twice as much as non-AC cabs. Why?

Let’s think about it.

AC cabs are newer vehicles than non-AC cabs, in general. But beyond that, they’re basically the same – kinda small, driven maniacally, etc.

Therefore, the demand for AC is such that the market clears at approximately 2x the price of non-AC. What else could explain it?

1. Strong demand among wealthy cab-riders who don’t want the pollution or the heat from keeping the windows down.
2. Relative scarcity of AC cabs vs. non-AC cabs.

I think both (1) and (2), taken together, explain the market for AC vs. non-AC to the best of my ability.

But on a personal level, I have a problem paying for AC cabs – it’s the same ride and I’m simply not willing to pay twice as much for the cool comfort.

So, two questions:

1. Why – beyond simple demand and supply – do you think AC cabs are twice as expensive as non-AC ones?
2. What multiplier (1.0x, 1.3x, 1.7x, 2.0x, 2.5x, etc.) are you be willing to pay for a AC vs. non-AC cab?


About Rob

Twitter @robertkatz
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2 Responses to Why does air conditioning cost twice as much?

  1. Dad says:

    Depends on other factors: Morning or evening? Am I tired, hot, and sweaty already, and on the way home and can get cleaned up or do I need the AC to try and get a bit cooler before a meeting? There’s a price for everything in the great big market, and many factors determine pricing.

  2. Pingback: In which I try not to sound too much like an annoyed expatriate…and probably fail (1 of 2) | The BobKatz Blog Project

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