Market Failure, Mattresses, and the Temptations of the Dark Side

The concept of “market failure” or “imperfect markets” is well-beloved by liberals, providing, as it does, one pretext or another for government intervention in the economy. (Joseph Stiglitz’s book, Principles of Microeconomics, the text my daughter has been assigned for her introductory economics course in college next fall, is divided into four parts. One of the four–or roughly a quarter of the textbook–is devoted entirely to “market failure.” Not a single chapter, so far as I can tell, discusses the persistent problem of “government failure”; that is, the overwhelming tendency of government economic interventions to make matters worse, not better.) Free market conservative that I happily am, I’ve spent a lot of time over the years inveighing against claims that markets are subject to systematic failings and imperfections. But every so often, I have to admit, I have an experience that triggers a certain, odd reaction.

One of those experiences took place last night.

My wife and I went looking for a new mattress. (A typical mattress, according to various consumer websites, is good for about ten years. We’ve kept ours for twenty.) We went to a mattress store–let us call it Sleep Highway–where we discovered scores of mattresses, all of which looked virtually identical but which varied in price from a few hundred to ten thousand dollars. We began hopping onto one mattress after another, as a salesman followed us, chattering incessantly while trying to nudge us, all the while, upmarket. (“Oh, that mattress? That’s really intended for kids just out of college. What you’ll want to look at is right over here. This mattress has intelli-coils. And this one has smart latex. And this one? This one has both.”) As confusing as the showroom appeared, in about an hour we’d figured out the basic market: There are only three or four major mattress manufacturers in the country, each makes about three different lines of mattresses, and each line comprises three or four models running, not surprisingly, from soft to medium to hard.

Once we’d figured that out, we found a couple of medium mattresses in our price range, one manufactured by Stearns & Foster, the other by Simmons. Then we headed home, thinking that we’d do a few price comparisons online. (On Consumer Reports I’d come across a guide insisting that mattress markups tend to be one hundred percent or more. If you shopped carefully, the guide asserted, you’d never have to pay more than 50 percent of list price.) What did yours truly quickly discover? Madness. Sheer and utter madness. Even though all retailers carry the same couple of dozen mattresses manufactured by the same three or four firms, none carries precisely the same lines. Sears, for example, carries a very slightly different line of Stearns & Foster mattresses–with slightly different trim and slightly different stitching–from Mattress Discounters, which in turn carries a very slightly different line of Simmons mattresses from Sleep Train. In what should be a free and highly competitive market, in other words, manufacturers and retailers have made it impossible–simply impossible!–for ordinary consumers to compare prices. Have you decided on the Stearns & Foster ultra plush in the “Eureka” line? And wonder whether Sears offers a better price than Sleep Train? Silly you. Nobody carries the “Eureka” line but Sleep Train. What you’ll find when you look up Stearns & Foster at Sears is the “Hearthstone” line. Which, in turn, you’ll be unable to find at Mattress Discounters. It’s a pretty good guess, I suppose, that the mid-range Stearns & Foster mattress at Sears is comparable to the mid-range Stearns & Foster mattresses at Sleep Train and Mattress Discounters, but–and this is the point–you can’t really be sure. If the mattress costs less at Sears, is that because Sears is offering a better deal? Or a worse mattress? You, humble consumer, have no way of finding out.

Tell me, my Ricochet friends–tell me. When you read my tale of mattress woe, don’t you, too, almost–almost!–find yourself wishing the FDA or the FTC or some other government agency simply stepped in and forced the manufacturers to establish simple, straightforward labels that made comparison shopping possible? Don’t you, too–admit it!–feel the first stirrings–not that you won’t suppress them!–of a certain historical tendency? Don’t you feel–just slightly! For a moment!–like a socialist?

  1. The Mugwump

    You’re inviting the government into your BEDROOM!?!?!

  2. Bruce Hendricksen

    “If we wish to preserve a free society, it is essential that we recognize that the desirability of a particular object is not sufficient justification for the use of coercion.” F.A. Hayek

  3. Ursula Hennessey
    C

    Oh Peter, if you’d only called me. We experienced the same “madness” about a month ago. I read the Consumer Reports guide all the way through and was essentially at the verge of tears. Even THEY said the mattress business was a wasteland of scams and left it impossible to rate stores, mattresses, etc. The best tidbit, which you describe and which CS notes, is that the stores call the exact same mattress by *different names* to expressly prevent price comparison shopping!! Ugh. I tell you, I was sickened by the whole thing. I forgot what we bought, but I literally prayed that we’d at least get one without bed bugs. Even the top lines have been accused of re-packaging used mattresses. Poor Peter. I feel your pain.

  4. Mel Foil

    It sounds like a job for Consumer Reports. Recently, I was looking for a fairly inexpensive cell phone. I don’t need an iPhone, or an Android. Just looking for a phone with a users manual that’s less than 200 pages long. There are hundreds of different models, all slightly different, with different markdowns, with different plans, etc. I guess the only thing worse than having three hundred choices is having only three choices. At least someone benefits from this madness–Consumer Reports.

  5. Conor Friedersdorf
    C

    The lesson I took away from my similar experience mattress shopping: whenever possible make major purchases at Costco, because some buyer there has already done the homework, and selected a product of above average quality at below average price. As for the larger philosophical question, I suppose I’d just caution against treating it as impervious to empirical analysis. Various industries are regulated in a way meant to enhance our ability to comparison shop. Did those regulations start us off down a slippery slope? Did they result in unintended consequences? I have no idea what the answer is and I’m ready to accept a persuasive argument in either direction.

  6. Duane Oyen

    The one place where the government has a legitimate role in the marketplace is in ensuring the free flow of information. I am not a fan of regulatory approaches to product specifications (“Energy Star” certification), but I am a huge fan of enforced labeling- we can choose.

    I cannot understand why so many conservatives complain about requirements that packaged goods have a list of ingredients on the package, with standards for how they are listed to help us know what we are buying. The sellers have every reason to want to obfuscate as much as possible. Why is it wrong for the FDA or USDA to make me able to find out whether my Cheerios are made with all oat flour or mostly corn?

    Would I prefer that private entities took care of this? Sure- but Underwriters Lab only works when the industry is committed to cooperating. With cars, federal crash and mileage standards are vital to good consumer decision-making, and JD Power has a large enough market to support their reliability ratings.

    With regard to some items such as mattresses, sellers are committed to disguise, not disclosure, so you need enforceable rules for comparison. Fine by me.

  7. Trace

    Peter — You invariably sleep in a lot of hotels in your travels. They know from buying mattresses. The next time you sleep on a bed that you really like, ask the manager. In many cases they can even help you source the thing. I suspect you’ve already eaten up your savings with the time you’ve spent.

    But shame on Consumer Reports for not figuring this all out for you. I can’t believe there is not an enterprising blogger that has not already cracked the code. I’m betting there is a McKinsey report somewhere that has a chart laying this all out clearly.

  8. txmasjoy

    The mattress business, as flaky and confusing as it is, doesn’t vex me.

    I rather like the vastness of choices and prices, and that I can have free same-day delivery and free haul-away of my old set.

    I suggest you buy Mrs. Robinson a Tempur-Pedic, then help her make your capitalist bed and lie in it. 

     

  9. Lisa Hammitt

    Let’s not play directly into liberal hands. The mattress industry is the left’s favorite example of market failure.

    Briefly, private equity firms bought out Sealy and Simmons, the largest players, about 10 years ago and the claim is that they cut costs and raised prices. The liberal line is that LBOs made money while mothballing the industry. We just bought my son an excellent mattress from CostCo which is far more comfortable than my Simmons ever was and the cost was only $164.00 for a twin. Sounds like a rational market to me.

  10. MFQuinn

    Interesting and understandable, Peter, but I believe your response perhaps belongs under the “Be Careful What You Wish For” heading. Hendricksen’s Hayek quote above should not be taken lightly, can’t we all agree?

    So, what’s with the Tempur-Pedic ad tucked between comments? For future reference and in the interest of full disclosure, did your comment prompt the ad or did the ad prompt the comment? Some sort of new auto-marketing tool? I know everyone’s got to make a buck (even mattress sales people who, by the way, pay for a retail store so you can browse and then go home to search for rock bottom prices on the internet from someone who does not have a retail store….), but this rather surprised me.

  11. Duane Oyen

    Lisa Hammitt: Let’s not play directly into liberal hands. The mattress industry is cited by the left as an example of market failure, see: http://www.npr.org/templates/transcript/transcript.php?storyId=120391729.

    Lisa, how is it playing into liberal hands to want correct information to be reasonably accessible? We want the choice and the power to make it. I don’t see how this relates to the LBOs; if those two companies are now gutted and trying to sell crap at non-competitive prices in a crowded marketplace, it is not any example of market failure, it is stupid decision-making by the new owners and they will pay the price.

    I want less regulation of product designs and specs by regulators, and more truthful information where it is needed and I can’t subscribe to McKinsey studies.

  12. Bruce Hendricksen

    I’m with Lisa. I wouldn’t give an inch to the statists, were it up to me. All of these regulations come with a price, and it’s too high for my taste. I can fend for myself, thank you.

  13. cdor

    So,Peter, do you want the government to figure it out for you? You are a very smart guy, and I’ll bet that your wife is a smart woman (she married you, yes?). Figure it out yourselves. You don’t want the cheapest mattress, so don’t bother with them. Although, it wouldn’t be unwise to have a quick lay on one. Check out the $1000 mattress. How does it feel? Now lay on the $10000 mattress. Notice a difference? How much of a difference? Is it worth the price? Who cares what they call it. What’s the guarantee? What’s the return policy? What delivery and setup service does the retailer provide? Make your decision. Sleep well. Isn’t capitalism GREAT!!

    How about we put it this way…IF GOVERNMENT GETS INVOLVED, VERY SOON YOU WON’T HAVE A CHOICE AT ALL.

  14. Joe Leamon
    txmasjoy: The mattress business, as flaky and confusing as it is, doesn’t vex me.

    I rather like the vastness of choices and prices, and that I can have free same-day delivery and free haul-away of my old set.

    I suggest you buy Mrs. Robinson a Tempur-Pedic, then help her make your capitalist bed and lie in it.

    · Jul 7 at 3:23pm

    Any retailer who offers “free” delivery or any other “free” service with any purchase, should be avoided unless you intend to use the particular service. Or at least understand that those things are not free, but in fact built into the price of every purchase. If you don’t use the service, you still pay for it.

    Mattress shopping is annoying simply because it’s done so rarely. If this were a weekly (or even annual) purchase, it wouldn’t be a problem. However, because a person can go decades between new mattresses, it’s almost like learning to use chopsticks: it’s new, frustrating, and messy, but at least you aren’t hungry for more very soon.

    I’m all for truthful/factual labeling, but it wouldn’t help here.

  15. Jimmy Carter

    Twenty years? I find most consumer goods, nowadays, infinitely better than those of twenty years ago. Buy the least expensive and expect another twenty.

    By the way, what was the decision making process buying the original mattress? Or your children’s mattress(es)?

    Mr. Oyen,

    Why do you insist on ingredients listed on “packaged goods” and not mention restaurant menus?

  16. Aaron Miller
    Bruce Hendricksen: All of these regulations come with a price. · Jul 7 at 4:24pm

    Exactly. Government seldom does only what citizens ask it to. Government agencies tend to grow in scope, budget and influence.

    Duane, I agree that information can be vital. Information about food, in particular, is necessary because of allergies and problems like celiac disease. But involving government is always trading one problem for another. The very existence of government is an unspoken acknowledgement that the free will of individuals must be balanced with security and other values, but I prefer to err on the side of freedom.

  17. Wordcooper

    I know most of us probably don’t read Slate that often, but I remembered reading an article there about mattress shopping. I had followed a link from Lifehacker. I can’t even remember why I read the article, because I was not in the market. Here it is:

    http://www.slate.com/id/93956/pagenum/all/

    Interesting article. Confirms your worst fears, maybe.

  18. Scott R

    Ultimately the market will solve the problem: Here in the Cleveland area a local company, The Original Mattress Factory, is taking off by offering an alternative to the brand-name mattress racket. They offer a few basic choices, with cut-away comparisons with the brand-name equivalents. They eliminate the middle man, have set, non-negotiable prices, and absolutely no “sales.” People love it. Void filled. The market works.

    Check’em out online, Peter; I bet even with an obnoxious west-coast delivery charge, you’d still save money.

  19. ParisParamus

    Had the same problem when my prolonged Futon Period ended a few years ago. I guess the problem is no worse than with shopping for a car–except all mattresses look alike.

    You jest re government; and even if you were a benevolent sleep dictator, what would you prescribe? Perhaps objective measurements of firmness, an material longevity? I wonder what’s done in Sweden in the bedding industry…

    PS: pretty much all retail is a nightmare these days.

  20. Steve Boxmeyer

    I am certain that the Great & Glorious Federal Government could simplify mattress buying. After all, look how simple the IRS is. The FDA has streamlined the drug approval process so that it only takes years to get from the lab to the drug store.

    Personally I have had to bring people through the immigration process; The LEGAL immigration process. What was then called INS was a paragon of efficiency and transparency. Anyone that has done the same will testify to that. (I hope that the reader senses my sarcasm at this point.) As a former mortgage professional, I – and now most citizens – saw the excellent job Fannie Mae and Freddie Mac did with the housing industry.

    So sure let the great and glorious Federal Government run the bedroom.