There is a nifty paper out looking at the compensation of female obstetricians and gynecologists. Many woman prefer to be seen by a female OB/GYN, but less than half of such specialists are female. To an economist’s way of thinking, those women should be able to command much higher prices.
So, do they? Somewhat surprisingly, not really — or at least they don’t charge as much more as would equilibrate the situation. What happens instead is that the market for female OB/GYNs adjust via two mechanisms: prices for services, and waiting times. And given the how difficult it is to raise prices, especially in managed care settings, the main impact is on increased wait time for patients who want to see female OB/GYNs. You wait and wait and wait …
The trouble is, of course, while the market might be adjusting, it is in a form of little value to female OB/GYNs. After all, you can’t buy LCD TVs with patients’ waiting time.
The upshot: It’s worth remembering that while markets tend to respond to via price — and we have a tendency to assume that is the first and best way — it ain’t always how it happens.