A friend of mine wanted to go dancing the other day. He didn’t make it. After queuing at a club for quite a while, the bouncer turned him away.
I never liked being part of such a crowd, lining up for the allowance to dance, being examined by someone who decides if I fit the venue (and so I rarely went to such clubs).
I think very few like it. And yet many do it. Why? And maybe even more interesting: Why do club owners ban guests from entering? After all, they voluntarily waive revenue from admission and consumption of drinks.
An exciting story for economists.
First of all, the fact that this procedure exists and the fact that it exists voluntarily (the club owner pays for bouncers, and guests voluntarily queue up) shows that it is to the club owner’s advantage at least – he wouldn’t do it otherwise.
So how can such a restriction increase the club owner’s income?
I think there are two main reasons.
Firstly, with such a policy, club owners sacrifice short-term in favour of long-term income. This is, for example, if the bouncer keeps those guests away who tend to riot and spoil the evening for other guests (who then would not come back). In addition: A bouncer chooses the group in the club so that it fits well together. Dancing means community. And you want to feel comfortable in a community.
So with door policy, a club ensures that the dancers have a lovely and entertaining evening and will return (and thus pay again). This ensures the long-term existence of a club.
Secondly, bouncers suggest scarcity. By not letting everyone into the club, the bouncer is signalling that demand exceeds supply. Not everyone gets a chance. This automatically triggers the desire to get hold of one of the limited admissions.
(The feeling of) scarcity has tremendous power over us. It’s in our DNA. Sweets and fat are scarce in nature. But essential for the human body. That is why we desire it (with all the negative consequences since it is available to us in abundance).
So we are evolutionarily trained to want what is scarce. We have the physical sense that what is scarce is desirable to us. And since we also tend to imitate others the effect is amplified through those signalling that something is worth striving for (like people lining up in front of a club).
Very scarce goods and services are also in demand for a second reason. They signal high status. You get them either because you have enough money to buy them, or you have access to them due to your social status. For example, the celebrity who is let into the club (frequently by even bypassing the line).
As for me, I can accept the first reason (long-term vs short-term profit), but I don’t want to be part of a marketing strategy (giving the impression of scarcity). Who likes to be fooled?
Although one has to admit that some clubs actually have a shortage problem, meaning they cannot let everyone in. Then the marketing strategy may have been successful: The appearance of scarcity has increased demand enough that actual scarcity is occurring. It’s just hard for bystanders to tell if the scarcity is fake or real.
Alone the suspicion of being part of such a little fake scenario usually kept me away from those venues. But I was never a passionate dancer either. I can well understand that these considerations will not matter much for those who really want to dance in a hip club. They will, for good reasons, continue to stand in line and hope that they will get past the bouncer this time. Good luck!