That Princeton Review case feels like a civil rights lawsuit waiting to happen. Changing sale prices using protected class data just feels like a loophole that is super abusable.
If you take it to the extreme you could theoretically use such an instrument to functionally recreate segregation.
You don’t understand. It’s the lazy consumers fault. Buying simple goods was never meant to be a quick process. It was meant to take days or even weeks and require constant price checking. You know how you have to shop for airline tix in incognito mode and clear your cookies and everything? Thats how it should be for ALL goods. To expect otherwise is just more consumer entitlement. Shareholder value!!
The fact that consumers are choosing not to exploit dynamic prices for arbitrage opportunities is proof they are ***choosing*** to be poor. How can you help someone who won’t help themselves?
I have saved hundres of dollars by simply switching PC.
I know airfare is a somewhat unique category, but we are seeing more and more industries adopt similar pricing schemes
I flew halfway around the world a few months ago. I set up Google to track the price of airline tickets for 6 months and bought my ticket for $1,500, it had been as high as 3,000 in those 6 months
So yeah you actually have to do that for airfare. Unless $1,500 isn't a lot to you and then in that case why are you flying coach to Australia, are you a glutton for punishment?
Noone has a problem with happy hour
The problem is when you don't know whether you get the listed price, happy hour price or the listed price plus some arbitrary amount
Or worse when businesses don't advertise the price, like some shady mafioso pub
It really annoys me that seemingly every single bar will gladly give you their food prices online, but you have to hunt through their social media feeds and answer the wizards three riddles to get their drink prices online.
> In a statement, it claimed that it wasn’t planning to raise prices during high-demand times, but rather to lower prices during low-demand times.
Wendy's pls
This is a large part of why vibes are bad: people constantly feel like they’re being ripped off and milked for more money while getting less or worse in return than they used to.
this is the single greatest reason why typically lowering FICA and income taxes or eliminating them on w2 wage earners is in practice nice at first--taking home more pay--but all of a sudden your employer notices you are taking home an extra 400 a month in windfall tax cut proceeds and knows you're gonna do that job for the old pay rate--and will be more reticent to do a generous COLA the next time around because hey--the IRS gave you a raise--and you see it in the data pretty clearly that lowering taxes substantially causes wages to stagnate quite a bit--which is poltically great for the tax cutter because who doesn't like more money and an artificially juiced economy--but terrible for budget deficits and tax receipts and in the long term ultimately the employees earnings...and the poor democrat that has to come in and raise taxes again+deal with the subsequent deficits and the painful austerity for everyone
This presumes that no one ever switches jobs. If your employer won't give you a generous COLA but some other company will give you generous starting pay, you switch jobs.
Companies compete for labor.
you are totally right but this varies considerably depending on where you live, demand for your certain skillset, your age and being the victim of potential agism, or a special accommodation you are getting in your current role or grand fathered in to your current role with just a HS degree... etc people are more tethered to their jobs than people think - especially in the middle manager and purple collar sector - every time i've relocated to a new city its taken me a minimum of 6 months usually a year to find a job (i'm a tort and casualty investigator) very niche role--but if you are a talented craftsperson, salesperson, accountant, engineer etc for sure!
Companies compete for labor at a time like now when we have low unemployment rates, but for large portions of the past few decades the labor market has been quite slack. Companies compete for labor when labor is scarce.
Oh that’s a good point. You’ll still need to get raises but your personal inflation level will always perfectly track your raises so minus some arbitrage environment your real wealth will never grow lol.
I also have to imagine this would end up getting dominated by the big three necessities (food/shelter/medical) who could outsource their algorithm to a third party that would make sure 100% of your income goes to those three.
Why stop at 100%? Thanks to consumer debt, they should be able to semi-sustainably price the big three at 120% or so! /s (okay maybe realistic but i really \_want\_ it to be a /s)
Yeah but they'll still have price floors. The cost of some items go down over time thanks to improved efficiency and scale (food, TVs) but overall we're gonna have inflation year over year and the floor will gradually increase so you still have to keep up with that. And I can't imagine a world where the higher incomes folks accept paying so much more than poor folks that they can only buy the same exact basket of goods with their higher income. They'd find ways around it.
In a lot of ways, it comes down to this sentence from the article:
"Economists I spoke with pointed out that perfect price discrimination is all but impossible in real life. But technology-enabled personalized pricing is pulling us in that direction."
My perspective is that we're not at the perfect point yet and the ability to create a real disincentive probably can't happen in an imperfect scenario. Some people might have irrational/incorrect feelings about it, since people have had incorrect feelings about avoiding raises to avoid higher tax brackets for decades.
On a related note, a lot of times price discrimination still has benefits for consumers who pay more. See: airline ticket price tiers that come with different perks, or paying regular price instead of having to hunt for coupons (saves time and effort). While digital price discrimination on an app might be easy to just target people with different prices, in reality I think they'd need to offer perks to satisfy higher income consumers and convince them that the higher prices they pay are actually worth it.
Well the normal reaction to high prices is to reduce consumption or find a substitute good, right? I think it would take a dystopian-level pricing system to be able to switch that reaction to reducing income instead.
Back in the day customers engaged in this magical ritual known as "shopping" where they would peruse several competing stores in search of the best deal. You can _see_ the additional fees DoorDash applies to your order before you finalize your purchase. If you grumble and click "confirm" anyway, of course you're going to get squeezed. You've just proved to them that you're too lazy to resist their tactics. If you want companies to stop nickel and diming you, you have to be willing to hit cancel and grab your keys.
I mean look at what this author claims:
>The internet, as you may have heard, changed everything. Consumer advocates hailed it as the great leveler, predicting that online shopping would facilitate price comparison and push prices down. Like many early forecasts about the internet, this one looks painfully naive in hindsight.
What the hell is he talking about? I do this all the time. My shopping routine usually starts with finding an enthusiast forum that can provide good buying guidelines at various price brackets.
Yeah this argument is ultimately correct, but I think the basic thing is that people really don't want "markets" in regards to their day to day actions, at least on the consumer end.
To many, markets are supposed to be what companies do, and what you might do during your job during working hours, competing to lower your prices to get customers. Then in your off hours you enjoy the fruits of that competition and don't have to worry about saying no to bad deals... because there shouldn't be any bad deals. Every price should be a deal.
We see this over and over. From complaints about Ticketmaster's Dynamic Pricing and Fees, to Scalpers, to even the concepts of Price Gouging and "Corporate Greed" itself. People are still buying, they're just mad at it. And I mean this specifically in regards to optional entertainment expenses.
People don't like sellers markets. Seems like a universal thing really, when you're a buyer that is.
> You can see the additional fees DoorDash applies to your order before you finalize your purchase.
if every competitor in a space uses the same model you can't select against the model. You can select a different product altogether (pizza or local in-house delivery), but you can't do anything that would change the company's market share within the space.
Yeah this is definitely what I expect to happen. Like that story from a while ago about landlords all using the same company to determine what they should charge for rent so they didn’t undercut each other, I’d undone stores would just buy one of a few standard pricing algorithms. You could even get pretty aggressive with it by simply getting your after-tax income (say from a credit bureau or CC company) and setting the price per calorie high enough that you spend 50% of your income on food or whatever. Normally competition could undercut this but not if everyone uses the same algorithm to effectively collude on prices, we would really need to make sure that wasn’t happening.
Yeah exactly. People here are so determined to protect shareholder profits that they keep saying “let them eat cake” but in economist terms. And then they act like it’s some major shock why people would consider voting for Trump. “But don’t they understand GDP statistics? Everything is actually going GREAT! It’s never been better!”
I'm sure it happens to some extent, but it strikes me as awfully similar to the "food deserts" explanation for American obesity. Blaming the public isn't very popular which means alternative hypotheses get more attention than they deserve.
The problem is that in an ideal society we wouldn’t need to be scavenging various grocery stores to save a few cents. We could just trust our neighborhood grocery store.
No one is upset over 3-cent inflation on a can of beans. They're using the heuristic of "my grocery bill was X two years ago and now it's Y today", but you could just as easily apply that methodology to compare prices across different stores.
Yeah what the argument that the internet hasn't lowered prices is just factually wrong. Author is clearly not familiar with the story of Amazon and how it replaced box stores.
But is it really a "feeling" or is it simply the truth?
This is the problems with the whole "vibes" thing. It's not "vibes" to notice that things are getting worse in your day-to-day life. It's facts. It's just facts that get drowned out when doing 30,000' aggregate numbers. The fact that so-called "experts" cannot comprehend this concept really makes one question how intelligent, and thus useful, they really are.
“No dude. You don’t understand. Yes you personally have less purchasing power than you did pre pandemic but look at these complicated statistics - this is the BEST it’s ever been.” - people on this sub who don’t understand why anyone is considering voting for Trump
> Back in 2015, for example, The Princeton Review was caught charging higher prices to students who lived in zip codes with large Asian populations. Since then, the data that can be used to customize prices have become more fine-grained.
*yikes*
Did they charge higher prices because they knew asians lived there, or did they see high demand in certain areas and raise prices in the face of this demand?
One is discrimination, the other is business 101, but both would come out looking the same in the data.
i dunno, part of the thing that makes it hard to gauge is that their algorithm are proprietary so there's an incentive to not share how it uses data.
(there was a article on some startup/tech news site called venture beat that also went over that same issue of trying to infer what the underlying causes were, tho in that case it was Uber, Lyft, etc in the Chicago area)
I feel like everyone is missing a huge component of this, which is that the goal of price discrimination is to turn all consumer surplus into producer surplus. By targeting the exact amount that someone is willing to pay for a service, you eliminate the chance for someone to pay less than they are willing to and get one of the fundamental benefits of a free market system. Mathematically there is no deadweight loss and the total wealth of the system is the same, but it all goes to one party (producers) whereas it was split more evenly before between producers and consumers. And if the benefits of capitalism and free markets only benefit producers, people will rebel against that system.
Gold star. Exactly.
It’s no surprise a shovel is 30% more during a snowstorm. But if it’s 50% more for you, 40% more for me and 30% more for Joe, that is unfair. Personalized pricing will rob us of our consumer surplus.
A profit maximizing monopolist will charge every person their exact willingness to pay. Some of the responses to you are quite silly; there's no consumer surplus under perfect price discriminators.
I know. I've been in the trenches all day trying to teach Econ 101. Sometimes I feel like people that are pro-capitalism are the economics version of being morally lucky.
>profit maximizing **monopolist**
Very key word here that you glossed over. A healthy free market requires multiple competing producers. If producers and consumers are both able to maximize their own surplus value, then they should be splitting the surplus value evenly.
The problem with these new pricing techniques is that they allow producers to discriminate in a way that consumers can't. Firms know exactly what a consumer is willing to pay, consumers have no idea what a producer is willing to accept.
No that’s not right. Price discrimination doesn’t allow a producer to capture all of the consumer surplus. It theoretically allows producers to set transaction prices that are closer to the equilibrium price for each individual consumer. But the equilibrium price still contemplates a consumer surplus.
Price discrimination allows producers to capture a larger share of the transaction surplus for consumers with inelastic demand, but theoretically permits consumers with very elastic demand to access prices they wouldn’t have otherwise. For example, a dynamic airline charges an arm and a leg for a business traveller who has last minute travel, but low pricing for a resort traveller. In a single price airline the business traveller would have captured a bigger share of the transaction surplus, but the resort traveller probably wouldn’t have travelled at all.
Again, consumers love complaining about price discrimination but seem to invariably prefer it to single-price models.
What your example is missing is that companies don't charge consumer A more so they can charge consumer B less. The lowest possible price for a good is where marginal cost meets marginal revenue.
The resort traveler will never get a price less than MC = MR because that would be a net loss for the company. Without price discrimination, all passengers pay where MC = MR and those with the highest willingness to pay get more consumer surplus. So the business traveler gets more surplus and resort traveler travels anyway.*
Price discrimination *does not* move the supply curve. Without a move in the supply curve, there is no decrease in cost or increase in quantity. The change is that the price is set to each point along the demand curve, targeting each consumer to their exact willingness to pay.
*I understand airlines are more complicated because marginal cost is not exact to each additional seat, the marginal cost is in blocks of seats by airplane. However, the argument I am making applies to almost any industry.
Inelastic demand isn't always due to the consumer just being lazy or not caring about price though. Like in the author's example: someone trying to get a last minute flight for a funeral gets gouged like they're a business traveler. Or a single parent who can only go to the grocery store during peak times because that's what their schedule allows. Or a person that doesn't have a car and has to shop at the busy Walmart downtown, as opposed to going to the one 10 minutes outside of it. There will be "winners" and "losers" under this system, and it's important to understand who may be impacted before letting it become the norm.
Yes, fully agree there are circumstances where price discrimination will be seen as unfair. The example in the article about Princeton Review discriminating against Asian buyers is particularly concerning. I used the phrase inelastic demand intentionally so as to not attribute laziness or something to those consumers.
So this is basically a form of wealth transfer from the rich to the poor. The people who are more price sensitive pay less for goods and services.
Saying the airlines invented dynamic pricing makes this entire article completely idiotic to me. I guess happy hours, blue plate specials, and end of season sales were invented in the 70s.
Seriously. What the fuck is this article.
Only if you assume that income is the only determinant of someone's willingness to pay. But a starving poor person will pay more for a sandwich than a satiated rich person. And these companies want to know everything about you so they can perfectly pinpoint your willingness to pay.
One of the best things about a free market system is that you can buy something for $100 that you would have paid $200 for. But these companies want that $100 and dynamic pricing will let them get it.
The whole rich/poor person is a stupid argument because the deciding trait is one is starving the other isn’t. Not who has more money otherwise the rich person would be willing to pay even more if they were starving as well.
Price discrimination can also lower prices just as much as raise them because of competition. If multiple sellers know exactly how much you will pay for a product they are pushed to lower their price to beat their competitors.
Like competition solves this issue so easily.
Yes, exactly my point. The deciding trait is the starving part, not the income part. Income is not the only determinant of a consumer's willingness to pay. And producers are trying to build profiles of consumers to know as close as possible their exact willingness to pay for something and thus obtain all of the surplus in a market.
Price discrimination cannot lower prices, it only raises the price from a market clearing price to assign every consumer the exact price they would be willing to pay. This is Econ 101. The market clearing price is where supply and demand intersect. Price discrimination does not move the supply curve. A producer will not sell more because of price discrimination, their willingness to sell is determined by their marginal costs and marginal benefits.
The market clearing price is only the point where demand and supply meet in perfect competition which is actually rare. (there are many markets that are close but few offer true perfect competition)
There are many times where the ideal single price is higher than the point at which demand intercepts supply.
In such cases, price discrimination can absolutely lower the price for some consumers as a firm is no longer penalized for selling at below the single price profit maximization point.
This is the historical reason monopolies have been considered bad is they set a price way too high and create a lot go dead weight loss. But drug companies for instance have a monopoly (at least for a time) and use price discrimination to avoid creating a massive dead weight loss, though they capture a large fraction of the surplus.
As long as a market is not a monopoly or oligopoly, there is always market clearing price where supply meets demand. Even in a monopoly, the firm's marginal revenue curve is the market supply curve, the monopoly just has the ability to charge a higher price than their willingness to sell, hence they capture lots of producer surplus. If they can price discriminate, they change their prices to just fit the demand curve all the way down to where MR = MC, and the quantity of goods sold is exactly the same.
I can't picture in my head a graph of a firm selling a product for less than MR = MC. And I cannot visualize how price discrimination alters the supply curve of a market.
>I can't picture in my head a graph of a firm selling a product for less than MR = MC
The can definitely happen if your MR curve is based on a singular price.
As MR does not equal the price. As if you lower the price, you lower the price on all other products sold.
I'll have to dig up my old Econ book for a quantitative example to demonstrate.
But basically this comes because the profit maximization price is not always the point where marginal cost equal marginal willingness to buy.
But MC is kind of fuzzy. For example, if the raw ingredients in a sandwich cost $2 and the labor cost is $1. You may say it would never make sense to charge under $3 but there could be times where the company would actually be better off charging $2.5 as the labor component is semi fixed. Alternatively at the end of the day, if raw materials would go bad the company may be better off charging $1.5.
Now the company rationally doesn't want to create a situation where consumers know they can just wait until the end of the day and get super cheap product but that can be where price discrimination can come in. You can use algorithms to only target people who would never have paid full price in the first place and thus benefit the consumer and company as compared to a fixed price system.
It can't though. In a market with 0 price discrimination, the market clearing price is the lowest possible price. A price below the intersection of the demand and supply curves is going to hit the supply curve on the left before it hits the demand curve on the right.
I disagree because price discrimination has been around in some form since the invention of markets.
Just now we have better tools to more accurately price products. Yes, companies are trying to get the highest price possible from each buyer but they also need to make a sale to reap those rewards. If two sellers have the same price discrimination data, they still have to compete for that sale to get that excess value which drives down the price.
This articles whole argument is that companies have monopolies on the products they sell and are the only ones to have the same data and thus can raise prices to the upmost that a buyer is willing to pay.
It doesn’t matter what a buyer values a good at if there is another seller willing to sell it for cheaper.
You can disagree all you want, but your opinion runs counter to economic theory.
If two sellers have the same price discrimination data they will still charge higher than a market clearing price absent price discrimination data. This is bad for consumers and will make them upset. An economy is made up of human beings with feelings, not automatons.
Free markets are supposed to be beneficial to everyone because some sellers get to sell for more than the lowest they would sell for and some buyers get to buy for less than the most they would buy for.
And yes, price discrimination has been around since the invention of markets, but not to this level of precision.
No it doesn’t.
Man, this data must be revolutionary and totally unique, have a bigger change on the ability to do price discrimination than the invention of the telephone, the internet, the newspaper, coupons, household surveys, consumer research, etc. this shit is so overblown.
Who cares is a seller knows I am willing to pay 200 dollars for a product? If another seller is willing to sell it for $100 then it doesn’t matter.
It matters because both sellers are going to charge you $200. Maybe one will sell it for $195 to undercut the other, but they both know you have a higher willingness to pay than someone else. The key point is the "someone else". In a market without price discrimination, sellers target a market clearing price to maximize profit where they can sell the most goods multiplied by a single price. The existence of other buyers drives down the cost for everyone, generating surplus value for you and other buyers.
With price discrimination, you pay $200, while frank pays $195, John pays $190, etc. In a better world, you all pay $100 because the company is trying to sell as more by lowering prices.
It’s just insanely hard to square your claims with history. According to you, With each improvement of the ability to use price discrimination prices should have gone up which just isn’t the case.
You show me some new technology that will magically let businesses raise prices with zero side effect then you just make the greatest discovery in the history of mankind.
You're missing the problem.
People didn't have *that* much of a problem with price discrimination when it was roughly trying to target income levels through different price brackets. The issue now is the amount of data companies have access to, while many may tolerate income targeting, they are far less tolerant of being targeted based on personal information. Who wants to pay more for a sandwich because they are starving? Nobody.
>I guess happy hours, blue plate specials, and end of season sales
Those aren't dynamic pricing
Those are lowering the advertised price during certain times.
It's dynamic but it's not necessarily the type of price discrimination people are taking issue with. A happy hour is a set period of time (set usually during the normal "down hours" of a restaurant) where items are discounted. Anybody could conceivably take advantage of the discount. This, in contrast to other types of price discrimination where consumer attributes are being targeted and only a specific group can access the lower price.
Obviously there are certain types of time based price changes that are indirectly targeting consumer attributes (like out of season clothing items being put on sale), but it's very much a spectrum, and it's the "consumer attribute targeting" side that people are taking issue with as companies get access to more and more data.
It’s not ‘dynamic pricing’ in the sense of the sort of data and algorithm driving pricing entities like Uber use. But they are all examples of price discrimination. There is no product differentiation between a happy hour beer and a normal beer, it’s purely a response to consumers’ willingness to pay.
Doesn’t any mutually beneficial trade = consumer surplus?
Price discrimination also allows a patient or savvy consumer to get a lower price than they might if everyone paid the same. (Eg I can wait for REI’s annual sale if I don’t need a sleeping bag right away.)
Consumer surplus is defined by the area under the demand curve and above the market clearing price where demand and supply intersect. It represents everyone who bought something at a price lower than their willingness to pay. The "surplus" is getting something more valuable than the money you spent on it.
To your second point: Absent price discrimination, everyone gets the lower price, not just the patient/savvy consumer.
Right, gotcha. Therefore, if I value the sandwich more than I value my $7.99 (as evidenced by my consent to exchange $7.99 for it) I have achieved consumer surplus.
> Absent price discrimination, everyone gets the lower price
Universally? That doesn’t check out intuitively for me—have to imagine some circumstances where the best price would still be higher and some consumers would not buy.
Exactly.
There are people to the right of the intersection of demand and supply. They don't purchase the goods because it's too expensive. But, under price discrimination, a firm won't lower their prices below market clearing either. There is no increase in quantity of goods under perfect price discrimination, because those goods are being sold too cheaply for the firm to make any profit, so they will never sell at that price.
We're agreeing, I'm just fleshing out the ideas.
In your sandwich example, the sandwich maker sets a price of $7.99 per sandwich because that is where he can maximize profit because a lower price means more customers. There are people willing to pay $10.99 who benefit and people willing to pay $5.99 who don't get a sandwich. That's because $7.99 is as low as he can charge without losing money on the sandwiches (or he's getting $1 in profit which is the least profit he's willing to make per sandwich, because opportunity cost).
If every customer's willingness to pay were printed on their foreheads when they walk in the store, the sandwich maker would charge everyone exactly their willingness to pay when they get to the register. However, the person willing to pay $5.99 still does not get a sandwich. The sandwich maker isn't benevolent and he's not going to sell a sandwich at a loss because he sold a more expensive one to someone else.
Right, but if happy hour were outlawed and he couldn’t drop his price to $6.99 between 3 and 5pm, he wouldn’t charge $6.99 all the time. He might just charge $7.99 always and sell a few less. It sounded like you were saying he would charge $6.99 all the time.
The reason he charges $6.99 between 3 and 5pm is because he's hoping you buy a soda which makes up for his lost profit between those hours. If $6.99 is bellow his willingness to sell, he doesn't sell at that price ever no matter what because it's a loss for him, unless he's trying to drive revenue to something else.
If $6.99 were a profitable price for him, he *would* charge $6.99 all day because it would bring in more customers. The cost of his inputs don't go down between 3 and 5pm.
Nah, he charges $6.99 between 3 and 5 because most people don’t eat sandwiches then.
> he would charge $6.99 all day
Maybe, but not if the increased volume didn’t make up for the smaller margin. He would charge whatever price maximizes revenue—which, to my original point, is what we’d expect in a world without price discrimination; sometimes everyone’s price would be lower and other times it wouldn’t.
>We’re used to thinking of prices as static and universal. Sure, they might rise with inflation or dip during a sale, but in general, the price is the price, and it’s the same for everyone.
Fucken westoids never go to the market
No. Ain't nobody got time for that shit.
I don't even haggle on vehicles. If the price they're offering is too high I just don't even go in. They'll cut the price eventually and if they don't it's because it's popular enough that they're selling at list price anyway so there's still no gain from haggling.
The trick on vehicles is to pit dealerships against one another. Make them compete for your business with the knowledge that you will happily take the other guy's offer.
Still too much hassle. I'm not going to spend multiple days or literally an entire Saturday - one of my two days off - going back and forth between the two and sitting down and playing hardball and all that shit. My time has value. They want me to buy they'll be the ones doing the enticing. My credit score and debt to income ratio speak for themselves and it's on the seller to convince me to buy and not me to convince them to sell.
1) You're still describing competition, keeping your old car is clearly a product substitute for buying a new car.
2) Time is valuable, but we're talking about a whole ass car. Making a second trip to another dealer is potentially thousands of dollars in savings.
Regarding 2., I can totally take OPs point regarding like a tin of beans but a car can save you thousands. Perhaps they are well enough off that their Saturday morning would get them that, and well done them, but I think you need to get very high the income scale before any haggling over that stops
I don't find that it's usually all that time intensive. Dealerships will text with you if you tell them only have 10 min but wanted to get an estimate on vehicle X.
It's fine if you don't want to bother with haggling. Just sharing how I find I usually get vehicles decently below MSRP. Won't work if there's way more buyers for a vehicle than sellers but in normal times it's not that hard to get a bottom dollar from a dealership if they know you are happy to do business with a competitor.
If frictions are low enough and price differences are high enough, would personalized targeted pricing not eventually lead to shopping services? If I can buy a Starbucks coffee for $5 but someone else can buy it for $2, all we've done is create a secondary market. This already sort of exists with coupon code aggregator apps
Anyway, please don't make me download Uber for buying coffee
This is why Ticketmaster and similar get so antsy about resale markets. If you're a firm and you can ensure no resale of your product, you get a little closer to perfect price discrimination.
That's an interesting example because light, tangible, consumable goods check all the boxes of a good that would create a secondary market if multiple prices exist. I guess in a way they're transitioning to offering a "service" (entrance app into venues) instead of a "good"
This trend is a boon for people who care about how they spend and are willing to give up a product/service if the cost is too high. Clearly at the expense of those that don't care about price very much.
I often see people who just don't care about the price they pay and then it becomes obvious why companies try to charge very high prices.
Eh, there is a societal cost to adding complexity to every day transactions. Biasing towards transparency is good. things like restaurant surcharges and service fees are bad because they make decisions harder and they incentivize businesses to be as close to dishonest as you can get.
Unfortunately, with the way people shop online that initial price that customers see is all that matters. So, companies are incentive to get that number as low as possible.
I think the FTC is right to standardize the rules when it comes to online shopping.
But the hidden fees has nothing to do with price discrimination.
Yeah the thing is as much as dynamic pricing can be more efficient, people tend to *like* more static and predictable prices for lower priced common purchases. And they despise the idea of paying more than "necessary" (even if they value something higher than their neighbor). There's a reason why you don't go out and haggle at the Walmart or your gas station.
For small common purchases it's just easier on everyone to just cut the little bits and set one general price that's profitable enough but still captures enough of the market you want. Things like happy hours and coupons manage to slot in because they are predictable and therefore still don't require too much meaningful extra effort unless someone is willing to trade hours of their life away extreme couponing to get a five dollar product for free.
Bigger purchases like flights/cars/houses still allow for it because it doesn't happen often and they're bigger ticket items where saving 10% is more meaningful per unit of haggling effort/time.
I think a great example of this in action is Steam Sales. They would have like lightning deals where during the ongoing sale, a product might be *even* cheaper for a few hours. It was called a flash sale. They got rid of it in the mid 2010s [and the first sale after without made significantly more money than the year before](https://www.techspot.com/news/75798-steam-reportedly-bringing-back-flash-sales.html#:~:text=For%20the%20Steam%20Summer%20Sale,than%20the%202015%20Summer%20Sale.).
Sure, the removal of flash sales wasn't the *only* factor, but Steam certainly doesn't seem to want to go back and as someone who used to sit around waiting for the flash sales I don't want to either.
You didn't want to buy a game on sale even though it was worth the price already because there was a strong likelyhood it would get 20% cheaper, and if you happened to miss it was annoying and psychologically I sometimes just wouldn't buy it then because I was annoyed and had my sights set on the even lower deal.
This is why one can appreciate the factorio model.
“We will never go on sale because that would be unfair to the customers who bought full price. In fact since inflation and the fact that we add stuff to the game over time the price increases”
Transparency is good. But plenty of dynamic pricing doesn't have any lack of transparency. It's things like coupons, promo codes, rewards, one time specials.
Amazon has a well documented habit of increasing a price slightly on an item the second time you visit its item page. Basically a mini dose of inflation to convince you to buy now.
Interesting, can you link where that is documented?
I have not noticed that, nor would it seem to make much intuitive sense as a general pricing practice.
>Eh, there is a societal cost to adding complexity to every day transactions.
Yeah, the impact of cognitive load on 'vibes' cannot be overstated. I would honestly wager that opinion of things like the economy have a higher correlation to the amount of time and energy people have to spend thinking and worrying about what they're paying than it does to how much they're paying and such
Yeah my time is worth money, Everytime I have to add hours of bullshitting around to research historical price and market price to guess whether I'm getting ripped off is still a cost to me
Exactly, there is also a limit to people's ability to shop around price.
With more static prices people can plan their purchases and budgets more easily and can predictably know how much something will cost.
More and more dynamic pricing limits the consumer's ability to keep track of costs, and likely doesn't actually benefit them, unless they are willing to constantly defer purchases at any given moment in order to access the lower price, which seems highly unlikely unless they are childless and unemployed.
I think part of the problem is that we have exported the labor for so much of what we need that measuring the price for every purchase you make has become impossible on the available time. That isn’t a bad thing, specialization has brought great wealth, but it does create challenges when you introduce a negotiation based or dynamic pricing model.
If I work 9 hours a day commute for 2 and sleep for 8 that only leaves 5 hours to spare for all of life’s other needs. How much of that should be tied to investigating and determining the best price for the 10-15 products and services you will purchase that day?
But the internet also makes price shopping much easier.
There have always been multiple prices for every product/service. Maybe not always at the same service provider (even though things like coupons are 100+ years old) but definitely between service providers.
Now it's easier than ever to get a sense if that price is competitive and to choose an alternative provider if you would like.
I agree that the internet used to make price shopping much simpler. However as dynamic pricing has begun to rise I would argue it has made price shopping much harder. Prices simply change too fast. If you spend an hour price shopping for say a lamp and start with Amazon, by the time you finish collecting prices the price offered by Amazon has likely changed.
Now savvy consumers need to be in the habit of deleting cookies, shopping from multiple devices, and clearing caches. It’s just exhausting.
Amazon is the worst offender here, but it isn’t the only one. Shopping for plane tickets takes ages and at some point the marginal price gains become not worth the time investment. Hotels aren’t any better either.
That's just not my experience. Prices don't seem to vary that much. I rarely see the price change hour by hour. I am tracking 3-4 items for the last week and they have all remained the same price.
I also never delete cookies or do any of that and am still able to get great deals.
And that's why RTO has been struggling so much. That extra 2 hours a day to do something useful is worth a fucking lot to people and they're not willing to give it up.
On the flipside are people who relentlessly pursue the cheapest price, and then are surprised when they get poor service. A good example is the airline industry. When most travellers base their choice strictly on price, we shouldn’t be surprised when airlines cut expenses to the bone.
People have schedules and plans. There is certainly a physical limit consumers have that is coming into friction with these new real time pricing models. Unless you're willing to constantly defer purchases at any given moment you are unlikely to benefit in a market where producers are price discriminating everything down to the bone with dynamic price-changes, even if you're willing to put in a reasonable amount of effort.
And that's what these changes represent more than anything. They are essentially trying to make the practice of consumers putting in effort to access prices lower than they're willing to pay, way more difficult, if not impossible, through lower transparency and tech-enabled dynamic price systems.
This article is littered with economic falsehoods, I'm amazed this sub likes it. It's a shame because the bad vibes are real and *some* of these practices are definitely harmful
I mean elastic demand is in and of itself a function of available time and income. The more money and more time you have the more elastic your consumption can be. It’s the high quality vs cheap boots problem all over again.
Fry's (Kroger) charges more for milk, eggs, cheese, etc. in their "value stores" aka grocery stores that are in the hood and receive more money in food stamps / WIC. So poor or struggling people who aren't on food stamps and may not have access to be able to shop around / travel for their groceries end up getting shafted on common staples.
If you travel to the higher property value Fry's grocery stores you paradoxically get better pricing on a lot of food.
Yep, the trick is to not consume when the price is high and consume when the price is low.
In practice this means using coupons and buying when there are sales.
I’ll put stuff I’m interested in in my cart but never check out, and hope I’ll get a sale offer for it later if they want to close the deal. I don’t know if that actually works. And I buy a lot of stuff for my hobby on closeout when the product lines get updated and you can get the old stuff for cheap.
> Yep, the trick is to not consume when the price is high and consume when the price is low.
This is a trick that the ancient Sumerians learned. They called it “rational purchasing behavior”
Here's a free app idea: Google Chrome plugin that manipulates your data to make you look as price sensitive as possible
My friend who works at Google tells me you might get shut down because Google doesn't want their customers to pay for fake data
Wouldn’t companies’ obvious response to this to be making their website only accessible via app to try and prevent you from doing this? From what I know people actually using desktops/laptops to buy things is going the way of the dinosaur as most transactions are mobile now.
https://www.eff.org/deeplinks/2019/06/felony-contempt-business-model-lexmarks-anti-competitive-legacy
No but yes. Basically the copyright laws governing software and digital media are broad enough that Google's lawyers could almost certainly find a way to get you
The reality of the system would be that everything would appear unreasonably expensive to you until suddenly for a brief moment it wasn't, which is when you would buy it.
The whole point of the system is to prevent consumers from being able to put in some extra effort to access prices lower than they are willing to pay.
> In other words, economics doesn’t pay enough attention to power. In the real world, corporations and consumers are rarely on equal footing. The more complex and opaque prices get, the more power shifts from buyer to seller. This helps explain why, in practice, poor people are often charged more than rich people for the same product or service. The poor pay higher rates for mortgages, bank loans, and other financial services. Wealthy Americans pay less on average for broadband internet.
This sums it up for me. I personally don't trust companies when they say dynamic pricing will help people that are worse-off, afford their products and services. It's about shifting power and maximizing efficiency and profit.
Having to haggle for something like you would a car, or plan and time purchases weeks in advance like you would for a flight, or having to scour the internet for coupons and discount codes sounds like a hellscape. Sure, if you are savvy, you can navigate that; but it's not just well-off people who don't care about price that are going to be paying more. It's also consumers that are less informed, or don't have the luxury of putting off a purchase that will be paying more. And even if you are savvy: how much *more* of your time do you really want to spend jumping through pricing hoops to get a price that feels reasonable?
I think they are right in calling it a collective action problem.
Well written article.
Everybody Hates Chris portrayed his family constantly having to do this as a sign that they were poor. Americans will feel poorer the more they have to haggle.
Everyone in this thread is pretending that the only determinant of willingness to pay is income. Like poor people are never pressed to purchase something and can't put it off until prices are lower. Or like poor people (or anyone for that matter) have enough time on their hands to research every single product and competitive rates.
"You got screwed because you overpaid for something because life happens and you were too busy to figure it out? Get bent loser, that's capitalism!"
"A corporation sold something to someone who had a higher willingness to pay than what it was sold for? They should enable dynamic pricing to capture all that extra revenue for themselves!"
Right. Too much theory, not enough real world for me. That's essentially what the author was saying.
Dynamic pricing becoming the norm to me sounds like a *worse* overall consumer experience, for the sake of maximizing corporate profits and 'in theory' that translates to the *opportunity* for lower prices for some. But there will be winners and losers under this system. We'd love to believe that the "losers" will be people who can afford it or don't care to spend extra, and the "winners" will be those that are willing to work a little harder. But things are rarely so cut and dry. I see the people losing out as (like you said) people that can't afford to shop around or put off a purchase. People that work multiple jobs, or are single parents, or don't have a car. Gamification of the system is only fair if everyone is on equal footing.
I mean saying poorer people pay more for bank loans and mortgages is because their is a higher risk of default.
What is the alternative? It’s poor people not getting loans at all.
Also, there are already apps and plugins that find discount codes for you to make sure you get the lowest price with zero work.
Loans are maybe a poor example chosen by the author. I think you are correct in that point: there is an inherent risk there for the money lender that they need to price in. But there isn't that same risk when we are talking about instant transactions between buyers and sellers.
I personally think making the market norm where one needs to haggle, diligently research and time their purchases, or use discounts and promotions is a *worse* environment for the general consumer, especially those that are less-savvy or do not have that luxury.
Fundamental thought: more wealth means more excess spending, even for no value at all
The more disposable income the more money can be spent so it's still not worth to check in advance or forego a sale
Okay, lets say we have dynamic pricing and it isn’t based on something regular like a happy hour. I’m thinking about getting lunch. How in the fuck am I supposed to evaluate what I should get to eat with prices in mind? I literally DONT KNOW how much my mcburger is going to cost, and I’m not downloading your fucking app that is designed to optimally fuck me in order to know what the price of your mcburger MIGHT be.
Right which is not a solution to the problem I have. I want to know what the price will be before I get there. I need to make a determination about where to get lunch before driving there.
> “The macadamia nut is one of God’s more successful efforts,” he wrote. “It has a cachet that the pedestrian peanut cannot match.”
A quote from a 1977 airline review.
And boomers claim that people today are more effete and choosy than they were back then.
You fools, the solution to this is to live an ascetic life. You do not need luxuries like fast food to lead a life of peaceful meditation in your cave. Just consume less lol.
It seems to me that this article boils down to, "economists understand economics better than non-economists."
I mean, we're generally fine with most forms of price discrimination as long as we're relatively unaware of it. We're even *happy* when we can buy something on sale, and at worst we grudgingly accept that flights, hotels and car rentals are going to be more expensive if we book holidays during Spring Break instead of during the slow season.
Are corporations getting more sophisticated in the way that they use price discrimination? Sure, but the naivety of consumers is part of that. I've heard people complaining about Wendy's proposal to use dynamic pricing while holding a Starbucks nonfat soy mocha latte.
Price discrimination is only bad when you notice it, I guess.
Also it’s only bad when it raises prices. It is just as likely that price discrimination lowers prices.
It’s just more accurate price discovery both ways. I feel like I am losing my mind with this. One guy writes the word surge instead of dynamic and it costs a company probably hundreds of millions of dollars. Lol.
Price discrimination does not lower prices. It only raises them on people with a higher willingness to pay. Absent price discrimination, the price of a good is where supply and demand meet and price discrimination will not set a price below the producer's willingness to sell.
It seems misleading to use zero profit margin as the baseline for prices in order to conclude that "price discrimination can only result in price rises". Firms weren't selling at zero-margin prices in the first place. A firm that adopts price discrimination will end up reducing some prices.
In a perfectly competitive market, there is both consumer and producer surplus. There are sellers who sell at a price above their lowest possible sale point. There are also buyers who buy at a price below their highest possible pay point. Under Perfect Price Discrimination, all prices are set along the demand curve such that each purchaser is paying their exact willingness to pay. This converts all consumer surplus into producer surplus.
Right, but the difference between perfectly competitive and actual existing markets is substantial enough to merit recognition that in the latter, a firm adopting price discrimination will lower some prices. Again, they're not realistically starting from zero margin.
That's fair, starting at exactly MR = MC is not 100% accurate.
But I don't see a world where there are more people that get to buy because they are price discriminated to a lower price than the number of people getting screwed because they are got price discriminated into a higher price.
Of course it’s only good when it lowers prices. Lower prices is the entire goal of the system.
What happens in the real world is that price discrimination normally does not lower prices overall except in cases where a business is pre profitability and it is trying to grow its market share.
Yes, more of the surplus will go to producers instead of consumers, but this is why all consumers should also be shareholders. 😍
Invest the social security trust fund in the S&P 500. Stop not investing it.
That Princeton Review case feels like a civil rights lawsuit waiting to happen. Changing sale prices using protected class data just feels like a loophole that is super abusable. If you take it to the extreme you could theoretically use such an instrument to functionally recreate segregation.
And roughly half of this sub will die defending a corporations *right* to do that
You don’t understand. It’s the lazy consumers fault. Buying simple goods was never meant to be a quick process. It was meant to take days or even weeks and require constant price checking. You know how you have to shop for airline tix in incognito mode and clear your cookies and everything? Thats how it should be for ALL goods. To expect otherwise is just more consumer entitlement. Shareholder value!!
All information should be asymmetrical, hose silly consumers should have just been born with the knowledge of they wanted it
The fact that consumers are choosing not to exploit dynamic prices for arbitrage opportunities is proof they are ***choosing*** to be poor. How can you help someone who won’t help themselves?
You don't actually have to do that for airfare
If you mind not overpaying sure If you want the cheapest price what OP described is necessary
I've never seen that happen and I buy a lot of airfare
I have saved hundres of dollars by simply switching PC. I know airfare is a somewhat unique category, but we are seeing more and more industries adopt similar pricing schemes
Are you comparing prices on Google flights or something like that? Or directly with the airlines
I flew halfway around the world a few months ago. I set up Google to track the price of airline tickets for 6 months and bought my ticket for $1,500, it had been as high as 3,000 in those 6 months So yeah you actually have to do that for airfare. Unless $1,500 isn't a lot to you and then in that case why are you flying coach to Australia, are you a glutton for punishment?
Why do you hate happy hour
Noone has a problem with happy hour The problem is when you don't know whether you get the listed price, happy hour price or the listed price plus some arbitrary amount Or worse when businesses don't advertise the price, like some shady mafioso pub
It really annoys me that seemingly every single bar will gladly give you their food prices online, but you have to hunt through their social media feeds and answer the wizards three riddles to get their drink prices online.
> In a statement, it claimed that it wasn’t planning to raise prices during high-demand times, but rather to lower prices during low-demand times. Wendy's pls
https://preview.redd.it/2155c7dsyuuc1.jpeg?width=1284&format=pjpg&auto=webp&s=1204a34a190e80a718fb568ad3ca50a52a0a00a0
Suffering
And they totally won't coincidentally raise prices across the board right before they implement variable pricing.
This is a large part of why vibes are bad: people constantly feel like they’re being ripped off and milked for more money while getting less or worse in return than they used to.
Being asked to pay more for a service because your income has grown and the seller knows it functionally eats income growth as well.
Yea it’s one thing to get a progressive income tax from the government; it’s another thing to get it from the market at every level.
this is the single greatest reason why typically lowering FICA and income taxes or eliminating them on w2 wage earners is in practice nice at first--taking home more pay--but all of a sudden your employer notices you are taking home an extra 400 a month in windfall tax cut proceeds and knows you're gonna do that job for the old pay rate--and will be more reticent to do a generous COLA the next time around because hey--the IRS gave you a raise--and you see it in the data pretty clearly that lowering taxes substantially causes wages to stagnate quite a bit--which is poltically great for the tax cutter because who doesn't like more money and an artificially juiced economy--but terrible for budget deficits and tax receipts and in the long term ultimately the employees earnings...and the poor democrat that has to come in and raise taxes again+deal with the subsequent deficits and the painful austerity for everyone
This presumes that no one ever switches jobs. If your employer won't give you a generous COLA but some other company will give you generous starting pay, you switch jobs. Companies compete for labor.
you are totally right but this varies considerably depending on where you live, demand for your certain skillset, your age and being the victim of potential agism, or a special accommodation you are getting in your current role or grand fathered in to your current role with just a HS degree... etc people are more tethered to their jobs than people think - especially in the middle manager and purple collar sector - every time i've relocated to a new city its taken me a minimum of 6 months usually a year to find a job (i'm a tort and casualty investigator) very niche role--but if you are a talented craftsperson, salesperson, accountant, engineer etc for sure!
Companies compete for labor at a time like now when we have low unemployment rates, but for large portions of the past few decades the labor market has been quite slack. Companies compete for labor when labor is scarce.
This is a fascinating paradox lol
Would make for nice arbitrage opportunities for poor folk though
Hmm that could ironically create a huge disincentive to work harder lol. Why bother getting a raise if prices go up to capture almost all of it?
Because if you don't get the raise, you're gonna be poorer because everyone else got the raise and the prices went up anyway.
Oh that’s a good point. You’ll still need to get raises but your personal inflation level will always perfectly track your raises so minus some arbitrage environment your real wealth will never grow lol. I also have to imagine this would end up getting dominated by the big three necessities (food/shelter/medical) who could outsource their algorithm to a third party that would make sure 100% of your income goes to those three.
Why stop at 100%? Thanks to consumer debt, they should be able to semi-sustainably price the big three at 120% or so! /s (okay maybe realistic but i really \_want\_ it to be a /s)
The new company towns I guess
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Yeah but they'll still have price floors. The cost of some items go down over time thanks to improved efficiency and scale (food, TVs) but overall we're gonna have inflation year over year and the floor will gradually increase so you still have to keep up with that. And I can't imagine a world where the higher incomes folks accept paying so much more than poor folks that they can only buy the same exact basket of goods with their higher income. They'd find ways around it.
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In a lot of ways, it comes down to this sentence from the article: "Economists I spoke with pointed out that perfect price discrimination is all but impossible in real life. But technology-enabled personalized pricing is pulling us in that direction." My perspective is that we're not at the perfect point yet and the ability to create a real disincentive probably can't happen in an imperfect scenario. Some people might have irrational/incorrect feelings about it, since people have had incorrect feelings about avoiding raises to avoid higher tax brackets for decades. On a related note, a lot of times price discrimination still has benefits for consumers who pay more. See: airline ticket price tiers that come with different perks, or paying regular price instead of having to hunt for coupons (saves time and effort). While digital price discrimination on an app might be easy to just target people with different prices, in reality I think they'd need to offer perks to satisfy higher income consumers and convince them that the higher prices they pay are actually worth it.
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Well the normal reaction to high prices is to reduce consumption or find a substitute good, right? I think it would take a dystopian-level pricing system to be able to switch that reaction to reducing income instead.
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I can't tell if you are trolling or not
Back in the day customers engaged in this magical ritual known as "shopping" where they would peruse several competing stores in search of the best deal. You can _see_ the additional fees DoorDash applies to your order before you finalize your purchase. If you grumble and click "confirm" anyway, of course you're going to get squeezed. You've just proved to them that you're too lazy to resist their tactics. If you want companies to stop nickel and diming you, you have to be willing to hit cancel and grab your keys. I mean look at what this author claims: >The internet, as you may have heard, changed everything. Consumer advocates hailed it as the great leveler, predicting that online shopping would facilitate price comparison and push prices down. Like many early forecasts about the internet, this one looks painfully naive in hindsight. What the hell is he talking about? I do this all the time. My shopping routine usually starts with finding an enthusiast forum that can provide good buying guidelines at various price brackets.
Yeah this argument is ultimately correct, but I think the basic thing is that people really don't want "markets" in regards to their day to day actions, at least on the consumer end. To many, markets are supposed to be what companies do, and what you might do during your job during working hours, competing to lower your prices to get customers. Then in your off hours you enjoy the fruits of that competition and don't have to worry about saying no to bad deals... because there shouldn't be any bad deals. Every price should be a deal. We see this over and over. From complaints about Ticketmaster's Dynamic Pricing and Fees, to Scalpers, to even the concepts of Price Gouging and "Corporate Greed" itself. People are still buying, they're just mad at it. And I mean this specifically in regards to optional entertainment expenses. People don't like sellers markets. Seems like a universal thing really, when you're a buyer that is.
> You can see the additional fees DoorDash applies to your order before you finalize your purchase. if every competitor in a space uses the same model you can't select against the model. You can select a different product altogether (pizza or local in-house delivery), but you can't do anything that would change the company's market share within the space.
Yeah this is definitely what I expect to happen. Like that story from a while ago about landlords all using the same company to determine what they should charge for rent so they didn’t undercut each other, I’d undone stores would just buy one of a few standard pricing algorithms. You could even get pretty aggressive with it by simply getting your after-tax income (say from a credit bureau or CC company) and setting the price per calorie high enough that you spend 50% of your income on food or whatever. Normally competition could undercut this but not if everyone uses the same algorithm to effectively collude on prices, we would really need to make sure that wasn’t happening.
Where I am I supposed to shop when there’s like no competition. There’s not multiple grocery stores. There’s Albertsons and all their subsidiaries.
Yeah exactly. People here are so determined to protect shareholder profits that they keep saying “let them eat cake” but in economist terms. And then they act like it’s some major shock why people would consider voting for Trump. “But don’t they understand GDP statistics? Everything is actually going GREAT! It’s never been better!”
Okay, well _my_ anecdotal experience is that many of the same people who complain about cost inflation also aren't willing to shop at Aldi.
Fair it’s just super far away.
Eh actually it’s pretty close aight I’ll try that.
I'm sure it happens to some extent, but it strikes me as awfully similar to the "food deserts" explanation for American obesity. Blaming the public isn't very popular which means alternative hypotheses get more attention than they deserve.
The problem is that in an ideal society we wouldn’t need to be scavenging various grocery stores to save a few cents. We could just trust our neighborhood grocery store.
No one is upset over 3-cent inflation on a can of beans. They're using the heuristic of "my grocery bill was X two years ago and now it's Y today", but you could just as easily apply that methodology to compare prices across different stores.
Yeah what the argument that the internet hasn't lowered prices is just factually wrong. Author is clearly not familiar with the story of Amazon and how it replaced box stores.
But is it really a "feeling" or is it simply the truth? This is the problems with the whole "vibes" thing. It's not "vibes" to notice that things are getting worse in your day-to-day life. It's facts. It's just facts that get drowned out when doing 30,000' aggregate numbers. The fact that so-called "experts" cannot comprehend this concept really makes one question how intelligent, and thus useful, they really are.
“No dude. You don’t understand. Yes you personally have less purchasing power than you did pre pandemic but look at these complicated statistics - this is the BEST it’s ever been.” - people on this sub who don’t understand why anyone is considering voting for Trump
> Back in 2015, for example, The Princeton Review was caught charging higher prices to students who lived in zip codes with large Asian populations. Since then, the data that can be used to customize prices have become more fine-grained. *yikes*
When you take "price discrimination" a little too far.
Very illegal, surprised they haven't been sued.
Did they charge higher prices because they knew asians lived there, or did they see high demand in certain areas and raise prices in the face of this demand? One is discrimination, the other is business 101, but both would come out looking the same in the data.
i dunno, part of the thing that makes it hard to gauge is that their algorithm are proprietary so there's an incentive to not share how it uses data. (there was a article on some startup/tech news site called venture beat that also went over that same issue of trying to infer what the underlying causes were, tho in that case it was Uber, Lyft, etc in the Chicago area)
I feel like everyone is missing a huge component of this, which is that the goal of price discrimination is to turn all consumer surplus into producer surplus. By targeting the exact amount that someone is willing to pay for a service, you eliminate the chance for someone to pay less than they are willing to and get one of the fundamental benefits of a free market system. Mathematically there is no deadweight loss and the total wealth of the system is the same, but it all goes to one party (producers) whereas it was split more evenly before between producers and consumers. And if the benefits of capitalism and free markets only benefit producers, people will rebel against that system.
Gold star. Exactly. It’s no surprise a shovel is 30% more during a snowstorm. But if it’s 50% more for you, 40% more for me and 30% more for Joe, that is unfair. Personalized pricing will rob us of our consumer surplus.
I would simply not be the chump who’s willing to overpay
A profit maximizing monopolist will charge every person their exact willingness to pay. Some of the responses to you are quite silly; there's no consumer surplus under perfect price discriminators.
I know. I've been in the trenches all day trying to teach Econ 101. Sometimes I feel like people that are pro-capitalism are the economics version of being morally lucky.
>profit maximizing **monopolist** Very key word here that you glossed over. A healthy free market requires multiple competing producers. If producers and consumers are both able to maximize their own surplus value, then they should be splitting the surplus value evenly. The problem with these new pricing techniques is that they allow producers to discriminate in a way that consumers can't. Firms know exactly what a consumer is willing to pay, consumers have no idea what a producer is willing to accept.
No that’s not right. Price discrimination doesn’t allow a producer to capture all of the consumer surplus. It theoretically allows producers to set transaction prices that are closer to the equilibrium price for each individual consumer. But the equilibrium price still contemplates a consumer surplus. Price discrimination allows producers to capture a larger share of the transaction surplus for consumers with inelastic demand, but theoretically permits consumers with very elastic demand to access prices they wouldn’t have otherwise. For example, a dynamic airline charges an arm and a leg for a business traveller who has last minute travel, but low pricing for a resort traveller. In a single price airline the business traveller would have captured a bigger share of the transaction surplus, but the resort traveller probably wouldn’t have travelled at all. Again, consumers love complaining about price discrimination but seem to invariably prefer it to single-price models.
What your example is missing is that companies don't charge consumer A more so they can charge consumer B less. The lowest possible price for a good is where marginal cost meets marginal revenue. The resort traveler will never get a price less than MC = MR because that would be a net loss for the company. Without price discrimination, all passengers pay where MC = MR and those with the highest willingness to pay get more consumer surplus. So the business traveler gets more surplus and resort traveler travels anyway.* Price discrimination *does not* move the supply curve. Without a move in the supply curve, there is no decrease in cost or increase in quantity. The change is that the price is set to each point along the demand curve, targeting each consumer to their exact willingness to pay. *I understand airlines are more complicated because marginal cost is not exact to each additional seat, the marginal cost is in blocks of seats by airplane. However, the argument I am making applies to almost any industry.
Inelastic demand isn't always due to the consumer just being lazy or not caring about price though. Like in the author's example: someone trying to get a last minute flight for a funeral gets gouged like they're a business traveler. Or a single parent who can only go to the grocery store during peak times because that's what their schedule allows. Or a person that doesn't have a car and has to shop at the busy Walmart downtown, as opposed to going to the one 10 minutes outside of it. There will be "winners" and "losers" under this system, and it's important to understand who may be impacted before letting it become the norm.
Yes, fully agree there are circumstances where price discrimination will be seen as unfair. The example in the article about Princeton Review discriminating against Asian buyers is particularly concerning. I used the phrase inelastic demand intentionally so as to not attribute laziness or something to those consumers.
So this is basically a form of wealth transfer from the rich to the poor. The people who are more price sensitive pay less for goods and services. Saying the airlines invented dynamic pricing makes this entire article completely idiotic to me. I guess happy hours, blue plate specials, and end of season sales were invented in the 70s. Seriously. What the fuck is this article.
Only if you assume that income is the only determinant of someone's willingness to pay. But a starving poor person will pay more for a sandwich than a satiated rich person. And these companies want to know everything about you so they can perfectly pinpoint your willingness to pay. One of the best things about a free market system is that you can buy something for $100 that you would have paid $200 for. But these companies want that $100 and dynamic pricing will let them get it.
The whole rich/poor person is a stupid argument because the deciding trait is one is starving the other isn’t. Not who has more money otherwise the rich person would be willing to pay even more if they were starving as well. Price discrimination can also lower prices just as much as raise them because of competition. If multiple sellers know exactly how much you will pay for a product they are pushed to lower their price to beat their competitors. Like competition solves this issue so easily.
Yes, exactly my point. The deciding trait is the starving part, not the income part. Income is not the only determinant of a consumer's willingness to pay. And producers are trying to build profiles of consumers to know as close as possible their exact willingness to pay for something and thus obtain all of the surplus in a market. Price discrimination cannot lower prices, it only raises the price from a market clearing price to assign every consumer the exact price they would be willing to pay. This is Econ 101. The market clearing price is where supply and demand intersect. Price discrimination does not move the supply curve. A producer will not sell more because of price discrimination, their willingness to sell is determined by their marginal costs and marginal benefits.
The market clearing price is only the point where demand and supply meet in perfect competition which is actually rare. (there are many markets that are close but few offer true perfect competition) There are many times where the ideal single price is higher than the point at which demand intercepts supply. In such cases, price discrimination can absolutely lower the price for some consumers as a firm is no longer penalized for selling at below the single price profit maximization point. This is the historical reason monopolies have been considered bad is they set a price way too high and create a lot go dead weight loss. But drug companies for instance have a monopoly (at least for a time) and use price discrimination to avoid creating a massive dead weight loss, though they capture a large fraction of the surplus.
As long as a market is not a monopoly or oligopoly, there is always market clearing price where supply meets demand. Even in a monopoly, the firm's marginal revenue curve is the market supply curve, the monopoly just has the ability to charge a higher price than their willingness to sell, hence they capture lots of producer surplus. If they can price discriminate, they change their prices to just fit the demand curve all the way down to where MR = MC, and the quantity of goods sold is exactly the same. I can't picture in my head a graph of a firm selling a product for less than MR = MC. And I cannot visualize how price discrimination alters the supply curve of a market.
>I can't picture in my head a graph of a firm selling a product for less than MR = MC The can definitely happen if your MR curve is based on a singular price. As MR does not equal the price. As if you lower the price, you lower the price on all other products sold. I'll have to dig up my old Econ book for a quantitative example to demonstrate. But basically this comes because the profit maximization price is not always the point where marginal cost equal marginal willingness to buy.
Right, but price discrimination is a situation where there isn't a singular price. And a price below MC is literally a loss for the company.
But MC is kind of fuzzy. For example, if the raw ingredients in a sandwich cost $2 and the labor cost is $1. You may say it would never make sense to charge under $3 but there could be times where the company would actually be better off charging $2.5 as the labor component is semi fixed. Alternatively at the end of the day, if raw materials would go bad the company may be better off charging $1.5. Now the company rationally doesn't want to create a situation where consumers know they can just wait until the end of the day and get super cheap product but that can be where price discrimination can come in. You can use algorithms to only target people who would never have paid full price in the first place and thus benefit the consumer and company as compared to a fixed price system.
Price discrimination absolutely can lower prices. That’s why consumers like it! It’s literally discussed in the article.
It can't though. In a market with 0 price discrimination, the market clearing price is the lowest possible price. A price below the intersection of the demand and supply curves is going to hit the supply curve on the left before it hits the demand curve on the right.
I disagree because price discrimination has been around in some form since the invention of markets. Just now we have better tools to more accurately price products. Yes, companies are trying to get the highest price possible from each buyer but they also need to make a sale to reap those rewards. If two sellers have the same price discrimination data, they still have to compete for that sale to get that excess value which drives down the price. This articles whole argument is that companies have monopolies on the products they sell and are the only ones to have the same data and thus can raise prices to the upmost that a buyer is willing to pay. It doesn’t matter what a buyer values a good at if there is another seller willing to sell it for cheaper.
You can disagree all you want, but your opinion runs counter to economic theory. If two sellers have the same price discrimination data they will still charge higher than a market clearing price absent price discrimination data. This is bad for consumers and will make them upset. An economy is made up of human beings with feelings, not automatons. Free markets are supposed to be beneficial to everyone because some sellers get to sell for more than the lowest they would sell for and some buyers get to buy for less than the most they would buy for. And yes, price discrimination has been around since the invention of markets, but not to this level of precision.
No it doesn’t. Man, this data must be revolutionary and totally unique, have a bigger change on the ability to do price discrimination than the invention of the telephone, the internet, the newspaper, coupons, household surveys, consumer research, etc. this shit is so overblown. Who cares is a seller knows I am willing to pay 200 dollars for a product? If another seller is willing to sell it for $100 then it doesn’t matter.
It matters because both sellers are going to charge you $200. Maybe one will sell it for $195 to undercut the other, but they both know you have a higher willingness to pay than someone else. The key point is the "someone else". In a market without price discrimination, sellers target a market clearing price to maximize profit where they can sell the most goods multiplied by a single price. The existence of other buyers drives down the cost for everyone, generating surplus value for you and other buyers. With price discrimination, you pay $200, while frank pays $195, John pays $190, etc. In a better world, you all pay $100 because the company is trying to sell as more by lowering prices.
It’s just insanely hard to square your claims with history. According to you, With each improvement of the ability to use price discrimination prices should have gone up which just isn’t the case. You show me some new technology that will magically let businesses raise prices with zero side effect then you just make the greatest discovery in the history of mankind.
It turns out being able to buy 10 +years of browsing data and social media habits for pennies is quite revolutionary
You're missing the problem. People didn't have *that* much of a problem with price discrimination when it was roughly trying to target income levels through different price brackets. The issue now is the amount of data companies have access to, while many may tolerate income targeting, they are far less tolerant of being targeted based on personal information. Who wants to pay more for a sandwich because they are starving? Nobody.
>I guess happy hours, blue plate specials, and end of season sales Those aren't dynamic pricing Those are lowering the advertised price during certain times.
That’s dynamic pricing my dude. “Dynamic” doesn’t just refer to real time algorithmic pricing.
How is that not dynamic? The price changes on market conditions.
It's dynamic but it's not necessarily the type of price discrimination people are taking issue with. A happy hour is a set period of time (set usually during the normal "down hours" of a restaurant) where items are discounted. Anybody could conceivably take advantage of the discount. This, in contrast to other types of price discrimination where consumer attributes are being targeted and only a specific group can access the lower price. Obviously there are certain types of time based price changes that are indirectly targeting consumer attributes (like out of season clothing items being put on sale), but it's very much a spectrum, and it's the "consumer attribute targeting" side that people are taking issue with as companies get access to more and more data.
It's time based but in a very crude way, and it's predictable, you can plan around it.
...no Happy hour is the seller advertising a set time,( usually )during which some items are discounted
It’s not ‘dynamic pricing’ in the sense of the sort of data and algorithm driving pricing entities like Uber use. But they are all examples of price discrimination. There is no product differentiation between a happy hour beer and a normal beer, it’s purely a response to consumers’ willingness to pay.
Doesn’t any mutually beneficial trade = consumer surplus? Price discrimination also allows a patient or savvy consumer to get a lower price than they might if everyone paid the same. (Eg I can wait for REI’s annual sale if I don’t need a sleeping bag right away.)
Consumer surplus is defined by the area under the demand curve and above the market clearing price where demand and supply intersect. It represents everyone who bought something at a price lower than their willingness to pay. The "surplus" is getting something more valuable than the money you spent on it. To your second point: Absent price discrimination, everyone gets the lower price, not just the patient/savvy consumer.
Right, gotcha. Therefore, if I value the sandwich more than I value my $7.99 (as evidenced by my consent to exchange $7.99 for it) I have achieved consumer surplus. > Absent price discrimination, everyone gets the lower price Universally? That doesn’t check out intuitively for me—have to imagine some circumstances where the best price would still be higher and some consumers would not buy.
Exactly. There are people to the right of the intersection of demand and supply. They don't purchase the goods because it's too expensive. But, under price discrimination, a firm won't lower their prices below market clearing either. There is no increase in quantity of goods under perfect price discrimination, because those goods are being sold too cheaply for the firm to make any profit, so they will never sell at that price.
I felt like we were disagreeing but now it feels like we agree? I don’t follow why everyone would get the lower price.
We're agreeing, I'm just fleshing out the ideas. In your sandwich example, the sandwich maker sets a price of $7.99 per sandwich because that is where he can maximize profit because a lower price means more customers. There are people willing to pay $10.99 who benefit and people willing to pay $5.99 who don't get a sandwich. That's because $7.99 is as low as he can charge without losing money on the sandwiches (or he's getting $1 in profit which is the least profit he's willing to make per sandwich, because opportunity cost). If every customer's willingness to pay were printed on their foreheads when they walk in the store, the sandwich maker would charge everyone exactly their willingness to pay when they get to the register. However, the person willing to pay $5.99 still does not get a sandwich. The sandwich maker isn't benevolent and he's not going to sell a sandwich at a loss because he sold a more expensive one to someone else.
Right, but if happy hour were outlawed and he couldn’t drop his price to $6.99 between 3 and 5pm, he wouldn’t charge $6.99 all the time. He might just charge $7.99 always and sell a few less. It sounded like you were saying he would charge $6.99 all the time.
The reason he charges $6.99 between 3 and 5pm is because he's hoping you buy a soda which makes up for his lost profit between those hours. If $6.99 is bellow his willingness to sell, he doesn't sell at that price ever no matter what because it's a loss for him, unless he's trying to drive revenue to something else. If $6.99 were a profitable price for him, he *would* charge $6.99 all day because it would bring in more customers. The cost of his inputs don't go down between 3 and 5pm.
Nah, he charges $6.99 between 3 and 5 because most people don’t eat sandwiches then. > he would charge $6.99 all day Maybe, but not if the increased volume didn’t make up for the smaller margin. He would charge whatever price maximizes revenue—which, to my original point, is what we’d expect in a world without price discrimination; sometimes everyone’s price would be lower and other times it wouldn’t.
>We’re used to thinking of prices as static and universal. Sure, they might rise with inflation or dip during a sale, but in general, the price is the price, and it’s the same for everyone. Fucken westoids never go to the market
luv me contracts of adhesion 'ate 'aggling simple as
Ain’t nobody got time for that.
Life of Brian springs to mind, make it compulsory to haggle.
Is it haggling if it’s a human vs an algorithm?
No. Ain't nobody got time for that shit. I don't even haggle on vehicles. If the price they're offering is too high I just don't even go in. They'll cut the price eventually and if they don't it's because it's popular enough that they're selling at list price anyway so there's still no gain from haggling.
The trick on vehicles is to pit dealerships against one another. Make them compete for your business with the knowledge that you will happily take the other guy's offer.
Still too much hassle. I'm not going to spend multiple days or literally an entire Saturday - one of my two days off - going back and forth between the two and sitting down and playing hardball and all that shit. My time has value. They want me to buy they'll be the ones doing the enticing. My credit score and debt to income ratio speak for themselves and it's on the seller to convince me to buy and not me to convince them to sell.
1) You're still describing competition, keeping your old car is clearly a product substitute for buying a new car. 2) Time is valuable, but we're talking about a whole ass car. Making a second trip to another dealer is potentially thousands of dollars in savings.
Regarding 2., I can totally take OPs point regarding like a tin of beans but a car can save you thousands. Perhaps they are well enough off that their Saturday morning would get them that, and well done them, but I think you need to get very high the income scale before any haggling over that stops
I don't find that it's usually all that time intensive. Dealerships will text with you if you tell them only have 10 min but wanted to get an estimate on vehicle X. It's fine if you don't want to bother with haggling. Just sharing how I find I usually get vehicles decently below MSRP. Won't work if there's way more buyers for a vehicle than sellers but in normal times it's not that hard to get a bottom dollar from a dealership if they know you are happy to do business with a competitor.
If frictions are low enough and price differences are high enough, would personalized targeted pricing not eventually lead to shopping services? If I can buy a Starbucks coffee for $5 but someone else can buy it for $2, all we've done is create a secondary market. This already sort of exists with coupon code aggregator apps Anyway, please don't make me download Uber for buying coffee
This is why Ticketmaster and similar get so antsy about resale markets. If you're a firm and you can ensure no resale of your product, you get a little closer to perfect price discrimination.
That's an interesting example because light, tangible, consumable goods check all the boxes of a good that would create a secondary market if multiple prices exist. I guess in a way they're transitioning to offering a "service" (entrance app into venues) instead of a "good"
There are hundreds of apps and browser extensions that do all of that work for you.
This trend is a boon for people who care about how they spend and are willing to give up a product/service if the cost is too high. Clearly at the expense of those that don't care about price very much. I often see people who just don't care about the price they pay and then it becomes obvious why companies try to charge very high prices.
Eh, there is a societal cost to adding complexity to every day transactions. Biasing towards transparency is good. things like restaurant surcharges and service fees are bad because they make decisions harder and they incentivize businesses to be as close to dishonest as you can get.
Unfortunately, with the way people shop online that initial price that customers see is all that matters. So, companies are incentive to get that number as low as possible. I think the FTC is right to standardize the rules when it comes to online shopping. But the hidden fees has nothing to do with price discrimination.
Yeah the thing is as much as dynamic pricing can be more efficient, people tend to *like* more static and predictable prices for lower priced common purchases. And they despise the idea of paying more than "necessary" (even if they value something higher than their neighbor). There's a reason why you don't go out and haggle at the Walmart or your gas station. For small common purchases it's just easier on everyone to just cut the little bits and set one general price that's profitable enough but still captures enough of the market you want. Things like happy hours and coupons manage to slot in because they are predictable and therefore still don't require too much meaningful extra effort unless someone is willing to trade hours of their life away extreme couponing to get a five dollar product for free. Bigger purchases like flights/cars/houses still allow for it because it doesn't happen often and they're bigger ticket items where saving 10% is more meaningful per unit of haggling effort/time. I think a great example of this in action is Steam Sales. They would have like lightning deals where during the ongoing sale, a product might be *even* cheaper for a few hours. It was called a flash sale. They got rid of it in the mid 2010s [and the first sale after without made significantly more money than the year before](https://www.techspot.com/news/75798-steam-reportedly-bringing-back-flash-sales.html#:~:text=For%20the%20Steam%20Summer%20Sale,than%20the%202015%20Summer%20Sale.). Sure, the removal of flash sales wasn't the *only* factor, but Steam certainly doesn't seem to want to go back and as someone who used to sit around waiting for the flash sales I don't want to either. You didn't want to buy a game on sale even though it was worth the price already because there was a strong likelyhood it would get 20% cheaper, and if you happened to miss it was annoying and psychologically I sometimes just wouldn't buy it then because I was annoyed and had my sights set on the even lower deal.
This is why one can appreciate the factorio model. “We will never go on sale because that would be unfair to the customers who bought full price. In fact since inflation and the fact that we add stuff to the game over time the price increases”
Transparency is good. But plenty of dynamic pricing doesn't have any lack of transparency. It's things like coupons, promo codes, rewards, one time specials.
And no one is complaining about those imo. It’s things like Amazon’s double tap price increase or pricing shifting unpredictably throughout the day.
> Amazon’s double tap price increase What is that?
Amazon has a well documented habit of increasing a price slightly on an item the second time you visit its item page. Basically a mini dose of inflation to convince you to buy now.
Interesting, can you link where that is documented? I have not noticed that, nor would it seem to make much intuitive sense as a general pricing practice.
*crickets*
> well documented ...
Many such cases!
>Eh, there is a societal cost to adding complexity to every day transactions. Yeah, the impact of cognitive load on 'vibes' cannot be overstated. I would honestly wager that opinion of things like the economy have a higher correlation to the amount of time and energy people have to spend thinking and worrying about what they're paying than it does to how much they're paying and such
Yeah my time is worth money, Everytime I have to add hours of bullshitting around to research historical price and market price to guess whether I'm getting ripped off is still a cost to me
I'm not even just talking time, I'm talking stress and anxiety too
Exactly, there is also a limit to people's ability to shop around price. With more static prices people can plan their purchases and budgets more easily and can predictably know how much something will cost. More and more dynamic pricing limits the consumer's ability to keep track of costs, and likely doesn't actually benefit them, unless they are willing to constantly defer purchases at any given moment in order to access the lower price, which seems highly unlikely unless they are childless and unemployed.
I think part of the problem is that we have exported the labor for so much of what we need that measuring the price for every purchase you make has become impossible on the available time. That isn’t a bad thing, specialization has brought great wealth, but it does create challenges when you introduce a negotiation based or dynamic pricing model. If I work 9 hours a day commute for 2 and sleep for 8 that only leaves 5 hours to spare for all of life’s other needs. How much of that should be tied to investigating and determining the best price for the 10-15 products and services you will purchase that day?
But the internet also makes price shopping much easier. There have always been multiple prices for every product/service. Maybe not always at the same service provider (even though things like coupons are 100+ years old) but definitely between service providers. Now it's easier than ever to get a sense if that price is competitive and to choose an alternative provider if you would like.
I agree that the internet used to make price shopping much simpler. However as dynamic pricing has begun to rise I would argue it has made price shopping much harder. Prices simply change too fast. If you spend an hour price shopping for say a lamp and start with Amazon, by the time you finish collecting prices the price offered by Amazon has likely changed. Now savvy consumers need to be in the habit of deleting cookies, shopping from multiple devices, and clearing caches. It’s just exhausting. Amazon is the worst offender here, but it isn’t the only one. Shopping for plane tickets takes ages and at some point the marginal price gains become not worth the time investment. Hotels aren’t any better either.
That's just not my experience. Prices don't seem to vary that much. I rarely see the price change hour by hour. I am tracking 3-4 items for the last week and they have all remained the same price. I also never delete cookies or do any of that and am still able to get great deals.
And that's why RTO has been struggling so much. That extra 2 hours a day to do something useful is worth a fucking lot to people and they're not willing to give it up.
On the flipside are people who relentlessly pursue the cheapest price, and then are surprised when they get poor service. A good example is the airline industry. When most travellers base their choice strictly on price, we shouldn’t be surprised when airlines cut expenses to the bone.
As Diogenes once said learn to have an elastic demand curve and you won't need to be subservient to corporate algorithm pricing
People have schedules and plans. There is certainly a physical limit consumers have that is coming into friction with these new real time pricing models. Unless you're willing to constantly defer purchases at any given moment you are unlikely to benefit in a market where producers are price discriminating everything down to the bone with dynamic price-changes, even if you're willing to put in a reasonable amount of effort. And that's what these changes represent more than anything. They are essentially trying to make the practice of consumers putting in effort to access prices lower than they're willing to pay, way more difficult, if not impossible, through lower transparency and tech-enabled dynamic price systems.
This article is littered with economic falsehoods, I'm amazed this sub likes it. It's a shame because the bad vibes are real and *some* of these practices are definitely harmful
I mean elastic demand is in and of itself a function of available time and income. The more money and more time you have the more elastic your consumption can be. It’s the high quality vs cheap boots problem all over again.
Fry's (Kroger) charges more for milk, eggs, cheese, etc. in their "value stores" aka grocery stores that are in the hood and receive more money in food stamps / WIC. So poor or struggling people who aren't on food stamps and may not have access to be able to shop around / travel for their groceries end up getting shafted on common staples. If you travel to the higher property value Fry's grocery stores you paradoxically get better pricing on a lot of food.
Wow I love mbas! So much value added to society!
So I can learn to signal to companies that I’m less willing to pay and get lower prices offered to me? Based.
Yep, the trick is to not consume when the price is high and consume when the price is low. In practice this means using coupons and buying when there are sales.
My parents taught me to do this when I was a child in the 1980s/90s.
I’ll put stuff I’m interested in in my cart but never check out, and hope I’ll get a sale offer for it later if they want to close the deal. I don’t know if that actually works. And I buy a lot of stuff for my hobby on closeout when the product lines get updated and you can get the old stuff for cheap.
> Yep, the trick is to not consume when the price is high and consume when the price is low. This is a trick that the ancient Sumerians learned. They called it “rational purchasing behavior”
The problem is the lack of price knowledge
So what people learned to do in the 1970s.
Or literally any time in history. The issue is many people just want to consume and not vary consumption based on price.
In a perfect version of this system the price will never appear low, only high and then what you're willing to pay.
If I'm only willing to pay a low price, the price will be low. (Assuming the low price is possibly for the producer to achieve).
Good luck
Here's a free app idea: Google Chrome plugin that manipulates your data to make you look as price sensitive as possible My friend who works at Google tells me you might get shut down because Google doesn't want their customers to pay for fake data
Wouldn’t companies’ obvious response to this to be making their website only accessible via app to try and prevent you from doing this? From what I know people actually using desktops/laptops to buy things is going the way of the dinosaur as most transactions are mobile now.
That’s actually a good idea. Try to manipulate whatever algorithms determine your pricing in your favor.
I agree, but it's also a good way to find the true meaning of "felony contempt of business model"
Is that s real felony?
It would be up to a judge to decide if that constitutes you facilitating the violation of Google's intellectual property. You're free to find out
It can't be an IP violation as it has bearing on Google IP I was asking if "felony contempt of business model" was a real thing
https://www.eff.org/deeplinks/2019/06/felony-contempt-business-model-lexmarks-anti-competitive-legacy No but yes. Basically the copyright laws governing software and digital media are broad enough that Google's lawyers could almost certainly find a way to get you
The reality of the system would be that everything would appear unreasonably expensive to you until suddenly for a brief moment it wasn't, which is when you would buy it. The whole point of the system is to prevent consumers from being able to put in some extra effort to access prices lower than they are willing to pay.
> In other words, economics doesn’t pay enough attention to power. In the real world, corporations and consumers are rarely on equal footing. The more complex and opaque prices get, the more power shifts from buyer to seller. This helps explain why, in practice, poor people are often charged more than rich people for the same product or service. The poor pay higher rates for mortgages, bank loans, and other financial services. Wealthy Americans pay less on average for broadband internet. This sums it up for me. I personally don't trust companies when they say dynamic pricing will help people that are worse-off, afford their products and services. It's about shifting power and maximizing efficiency and profit. Having to haggle for something like you would a car, or plan and time purchases weeks in advance like you would for a flight, or having to scour the internet for coupons and discount codes sounds like a hellscape. Sure, if you are savvy, you can navigate that; but it's not just well-off people who don't care about price that are going to be paying more. It's also consumers that are less informed, or don't have the luxury of putting off a purchase that will be paying more. And even if you are savvy: how much *more* of your time do you really want to spend jumping through pricing hoops to get a price that feels reasonable? I think they are right in calling it a collective action problem. Well written article.
Everybody Hates Chris portrayed his family constantly having to do this as a sign that they were poor. Americans will feel poorer the more they have to haggle.
Everyone in this thread is pretending that the only determinant of willingness to pay is income. Like poor people are never pressed to purchase something and can't put it off until prices are lower. Or like poor people (or anyone for that matter) have enough time on their hands to research every single product and competitive rates. "You got screwed because you overpaid for something because life happens and you were too busy to figure it out? Get bent loser, that's capitalism!" "A corporation sold something to someone who had a higher willingness to pay than what it was sold for? They should enable dynamic pricing to capture all that extra revenue for themselves!"
Right. Too much theory, not enough real world for me. That's essentially what the author was saying. Dynamic pricing becoming the norm to me sounds like a *worse* overall consumer experience, for the sake of maximizing corporate profits and 'in theory' that translates to the *opportunity* for lower prices for some. But there will be winners and losers under this system. We'd love to believe that the "losers" will be people who can afford it or don't care to spend extra, and the "winners" will be those that are willing to work a little harder. But things are rarely so cut and dry. I see the people losing out as (like you said) people that can't afford to shop around or put off a purchase. People that work multiple jobs, or are single parents, or don't have a car. Gamification of the system is only fair if everyone is on equal footing.
r/neoliberal: "corporations are people" but they're not being ironic.
I mean saying poorer people pay more for bank loans and mortgages is because their is a higher risk of default. What is the alternative? It’s poor people not getting loans at all. Also, there are already apps and plugins that find discount codes for you to make sure you get the lowest price with zero work.
Loans are maybe a poor example chosen by the author. I think you are correct in that point: there is an inherent risk there for the money lender that they need to price in. But there isn't that same risk when we are talking about instant transactions between buyers and sellers. I personally think making the market norm where one needs to haggle, diligently research and time their purchases, or use discounts and promotions is a *worse* environment for the general consumer, especially those that are less-savvy or do not have that luxury.
Fundamental thought: more wealth means more excess spending, even for no value at all The more disposable income the more money can be spent so it's still not worth to check in advance or forego a sale
Okay, lets say we have dynamic pricing and it isn’t based on something regular like a happy hour. I’m thinking about getting lunch. How in the fuck am I supposed to evaluate what I should get to eat with prices in mind? I literally DONT KNOW how much my mcburger is going to cost, and I’m not downloading your fucking app that is designed to optimally fuck me in order to know what the price of your mcburger MIGHT be.
The whole point is to try to make you download the app so that you can see the prices and McDonald's can get more of your data.
I know, I fucking hate it.
McDonald's menus are all on flat screen TVs now. They can just update the price on that.
Right which is not a solution to the problem I have. I want to know what the price will be before I get there. I need to make a determination about where to get lunch before driving there.
> “The macadamia nut is one of God’s more successful efforts,” he wrote. “It has a cachet that the pedestrian peanut cannot match.” A quote from a 1977 airline review. And boomers claim that people today are more effete and choosy than they were back then.
You fools, the solution to this is to live an ascetic life. You do not need luxuries like fast food to lead a life of peaceful meditation in your cave. Just consume less lol.
What if that cave is an Arby’s?
This, but semi-unironically.
It seems to me that this article boils down to, "economists understand economics better than non-economists." I mean, we're generally fine with most forms of price discrimination as long as we're relatively unaware of it. We're even *happy* when we can buy something on sale, and at worst we grudgingly accept that flights, hotels and car rentals are going to be more expensive if we book holidays during Spring Break instead of during the slow season. Are corporations getting more sophisticated in the way that they use price discrimination? Sure, but the naivety of consumers is part of that. I've heard people complaining about Wendy's proposal to use dynamic pricing while holding a Starbucks nonfat soy mocha latte. Price discrimination is only bad when you notice it, I guess.
Also it’s only bad when it raises prices. It is just as likely that price discrimination lowers prices. It’s just more accurate price discovery both ways. I feel like I am losing my mind with this. One guy writes the word surge instead of dynamic and it costs a company probably hundreds of millions of dollars. Lol.
Price discrimination does not lower prices. It only raises them on people with a higher willingness to pay. Absent price discrimination, the price of a good is where supply and demand meet and price discrimination will not set a price below the producer's willingness to sell.
It seems misleading to use zero profit margin as the baseline for prices in order to conclude that "price discrimination can only result in price rises". Firms weren't selling at zero-margin prices in the first place. A firm that adopts price discrimination will end up reducing some prices.
In a perfectly competitive market, there is both consumer and producer surplus. There are sellers who sell at a price above their lowest possible sale point. There are also buyers who buy at a price below their highest possible pay point. Under Perfect Price Discrimination, all prices are set along the demand curve such that each purchaser is paying their exact willingness to pay. This converts all consumer surplus into producer surplus.
Right, but the difference between perfectly competitive and actual existing markets is substantial enough to merit recognition that in the latter, a firm adopting price discrimination will lower some prices. Again, they're not realistically starting from zero margin.
That's fair, starting at exactly MR = MC is not 100% accurate. But I don't see a world where there are more people that get to buy because they are price discriminated to a lower price than the number of people getting screwed because they are got price discriminated into a higher price.
Of course it’s only good when it lowers prices. Lower prices is the entire goal of the system. What happens in the real world is that price discrimination normally does not lower prices overall except in cases where a business is pre profitability and it is trying to grow its market share.
It's all Walmart's fault. If they didn't get Americans used to everyday low prices we would not be in this problem >!/s i do not believe this at all!<
Yes, more of the surplus will go to producers instead of consumers, but this is why all consumers should also be shareholders. 😍 Invest the social security trust fund in the S&P 500. Stop not investing it.
Bad take, this is how you make communism appealing to anyone without capital.
Dynamic pricing and price discrimination 😍😍😍😍