Privacy Incursions to Support Price Discrimination 402
An anonymous reader writes "BusinessWeek has an interesting interview with academic Andrew Odlyzko about how increased corporate spying will inevitably lead to targeted pricing and how this system can be abused." The paper (pdf) makes interesting reading. Very good insights into the reasons why businesses want to get to know you.
US Legal Ramifications To Targeted Pricing (Score:3, Insightful)
IN CAPITALIST AMERICA (Score:4, Insightful)
Re:IN CAPITALIST AMERICA (Score:3, Interesting)
Re:IN CAPITALIST AMERICA (Score:3, Insightful)
We need to change "government by the people, for the people" to "government by the haves, for the have-nots" so people stop growing up with the illusion that this isn't so, then get all bent out of shape when they figure it out.
Re:IN CAPITALIST AMERICA (Score:3, Insightful)
Has OJ found the real killer?
If you don't think that money has some serious influence on the legal system of the US then you are a little naive.
Re:US Legal Ramifications To Targeted Pricing (Score:5, Informative)
Re:US Legal Ramifications To Targeted Pricing (Score:2, Funny)
Re:US Legal Ramifications To Targeted Pricing (Score:2, Funny)
Re:US Legal Ramifications To Targeted Pricing (Score:5, Informative)
On the other hand, in conventional economic models at least, the existence of price discrimination is evidence that someone has market power and so should be subject to antitrust scrutiny. But, of course, there are lots of legal ways to have a monopoly (own IP, just happen to make the product better than anyone else...)
Re:US Legal Ramifications To Targeted Pricing (Score:2, Interesting)
Re:US Legal Ramifications To Targeted Pricing (Score:4, Interesting)
Interesting precedent you cite.
Is it legal to charge blacks more for basketball tickets than one charges whites? (Or to charge whites more than blacks at NASCAR events?)
If you're about to say "no", what about "Ladies' night" at your local watering hole - males pay a $5 cover charge, and females get in free?
And if you still say "no", how about "We don't even have skin color, name, or address in our database of loyalty-card purchases. But we found can charge higher prices for watermelon, chicken, and collard greens to consumers who also happen to be regular purchasers of Jheri Curl hair care products. Likewise, our data shows that we can charge a premium on Pabst Blue Ribbon, Budweiser, and 'wifebeater' undershirts to consumers who are regular purchasers of NASCAR memorabilia. Race has nothing to do with it."
Even if we assume the real-world data actually supports the stereotypes I (ab)used in my example, the freaky part is that race really doesn't enter into the equation. The goal is to maximize margins from everyone - a black guy who drinks cheap beer and loves NASCAR events gets gouged the same way as his white-trash neighbor :)
Insofar as accusations of racism go, your grocery store shouldn't care if your skin is pink or brown, so long as your money's green.
Targeted Pricing of Races (Score:3, Interesting)
If not, is it legal to have a lunch counter with only $100 lunches, but a 95% discount for whites? Or a University with $1,000,000 yearly tuition but a 90% discount for whites?
And if none of the above is legal, then I submit that other forms of Price Discrimination should be illegal too, be it gender, income class or anything else.
Re:Targeted Pricing of Races (Score:4, Informative)
I think that this is fundamentally different to discrimination based on attributes that are directly related to the activity such as ability to pay and desire to acquire.
The ultimate aim of price discrimination is to have people pay the exact amount that represents the tradeoff between desire to have and ability to pay irrespective of race, gender, sexual orientation or physical or mental disabilities. In the examples given by you effective price discrimination would actually allow poorer people to pay less than richer people. This is achieved in real life by way of scholarships (for education) , soft loans, and other welfare type benefits (even as far as food stamps) that 'usually' only go to the poorer members of society.
Price discrimination works both ways. It is in fact particularly beneficial for poor people. Selling drugs to poor countries at lower than US prices is price discrimination. Selling cars for $500,000 to rich people is price discrimination.
Re:US Legal Ramifications To Targeted Pricing (Score:4, Informative)
My point is simply that discrimination against certain groups is taboo, and will not soon be tolerated regardless of whether it is statistically justified. This is obvious from the anti-discrimination laws themselves, which make no allowance for discriminating on the basis of statistics.
Re:US Legal Ramifications To Targeted Pricing (Score:3, Interesting)
Could you imagine the lawsuits that would ensure if you offered at young people ONLY community, no one over 55 allowed ?!? and yet having one that allows ONLY people ver 55 is OK
Re:US Legal Ramifications To Targeted Pricing (Score:5, Insightful)
Re:US Legal Ramifications To Targeted Pricing (Score:3, Interesting)
People were upset with Coca-Cola Co. when they introduced the coke machines that would automatically increase the price when it got hot. Idiots...they should have marketed it as a discount. Coke machines that automatically lower the price when it gets cold. The prices would still be the same...say $0.50 for cold, $0.75 for hot, only
Re:US Legal Ramifications To Targeted Pricing (Score:5, Informative)
In fact it has been attempted on a consumer-by-consumer (3rd degree) basis by Amazon not too long ago. What happened is people found out through discussion in forums, consumer outcry followed and Amazon stopped it (search for the articles/blogs if you want).
Re:US Legal Ramifications To Targeted Pricing (Score:2, Informative)
Re:US Legal Ramifications To Targeted Pricing (Score:5, Informative)
On the other hand, a company is price discriminating if it sells the same product at different prices. In many circumstances, this is entirely legal.
Why price discriminate?
Imagine a company selling product X. There are three different consumers, A, B and C. A values X at EUR50, B at EUR100 and C at EUR200.
In a market where the company is unable to distinguish these customers, it can only sell the item to each customer at the same price. If it sells at EUR50, all three customers will buy, if it sells at EUR150, only customer C will buy.
Therefore, the company has every incentive to price differentially, optimally EUR50 to A, EUR100 to B and EUR200 to C.
Two problems: (1) The company will have to find out about the valuations. (2) The possibility of trading amongst the customers limits price discrimnation (A buys at EUR50 and sells on to C at a higher price).
(1) is usually not solved perfectly. Price discrimination is usually applied across different groups that can be identified (ie customers in country A vs customers in country B or students vs non-students). However, the article describes how technology can be used to achieve perfect price discrimination.
(2) Either the characteristics of the product are such that trading is impossible (ie personalised products) or difficult (high transaction costs). Alternatively, the company could prevent trading by using contracts or other competitive threats. This could be illegal under some circumstances.
Re:US Legal Ramifications To Targeted Pricing (Score:5, Informative)
Amazon.com tried this scheme before, offering the same item at different prices to different people to test reactions, but ended up embarassed when caught and refunded all those unknowingly involved in the test the difference between the price they paid and the lowest price that item was sold at during the test.
It's not price fixing... that's when the supposed competitors get together and agree on the price.
Price discrimiation is not always bad (micro-econ) (Score:2)
Re:US Legal Ramifications To Targeted Pricing (Score:2)
I sell temperature sensor kits for home automation systems... If I could sell the kit to you for $35.00 instead of my normal $16.00 because I see that you have lots more money and see that that is in your though to be acceptable range...
My profits would certianly go up..
what this means is that stupid shoppers will get creamed while smart shoppers will still get the best deal.
Re:US Legal Ramifications To Targeted Pricing (Score:3, Insightful)
It's not.
Price fixing causes an artifical oligopoly.
Simply charging the most that people will bear screws the wealthy and benefits the poor.
Region coding, for example, screws USians but massively benefits Indonesians (since they can't afford to pay US prices).
Re:US Legal Ramifications To Targeted Pricing (Score:5, Interesting)
To wit: imagine the "Preferred List" technique, where you and Mr. Jones receive a catalog. There is a product which normally lists for $700, but Mr. J's catalog has it for $500, where your catalog has it for $600. This is unfair. However, imagine being in an online auction for the same product. He bids $500, you bid $600. You win, AND you save money.
The only difference is that you feel superior in the auction method due to beating a number of people, whereas in the Preferred list method, you feel inferior due to being excluded from a perceived "gift".
Re:US Legal Ramifications To Targeted Pricing (Score:3, Interesting)
5: The airline technique, part 2: prices which change by the second, and aren't revealed until after you've expressed interest. Advertised prices which don't exist. Sorry, Mr Wealthy Employed Person, the price for this flight is now a little more expensive t
Re:US Legal Ramifications To Targeted Pricing (Score:3, Interesting)
This sort of economic philosophy doesn't foment economic growth. If we live in a world where everyone nickels and dimes each other to the point where the total profit through the supply chain is on the order of pennies on the dollar, then it drags down the w
Price 'Discrimination' is essentially capitalism (Score:4, Insightful)
Slap privacy on something and you can generate controversy pretty easily, but soda machines charging more when the weather's hot is nothing new.
Re:Price 'Discrimination' is essentially capitalis (Score:2, Informative)
The easy solution to this though is to simply not let the companies gather any information about you. For example, if you are a businessman, they will try to charge you more for airfare. Whereas, if they no nothing about you, they will assume that you are just a vacationer, an
Re:Price 'Discrimination' is essentially capitalis (Score:2)
Do you really think ANY company, ESPECIALLY the airlines, would make such an assumption? More likely, they'd default to the highest rate possible until you cave and give them the demo data they seek...
Come on people! Mr. Garrison devised a superior alternative to air travel but got shot down by the airlines anyway! These people are bloodthirsty and ruthless.</hyperbole>
GTRacer
Re:Price 'Discrimination' is essentially capitalis (Score:2)
Re:Price 'Discrimination' is essentially capitalis (Score:2, Insightful)
But, if you walk up to the machine and the numbers flip and charges you $20 for a coke because it detected the Guichi belt from the electronic ID chip in it, and the next person in line gets charged
There is a business model in consumables that is one price to everyone for this produc
Price manipulation by consumers (Score:5, Interesting)
Re:Price manipulation by consumers (Score:4, Interesting)
I don't see how you could do that whilst retaining the same credit card.
More interestingly, is how are they going to deal with someone browsing a website anonymously, and then loggin into their account, and seeing a different price?
Dear whatever.com, I notice you're charging me over the odds. Since you don't value my custom, I shall make my purchase elsewhere.
Sincerely.
Re:Price manipulation by consumers (Score:3, Funny)
While you make a valid point, I think the simple amount of junk mail I get daily offering me NEW NEW CREDITCARDS AT LOW LOW RATES! makes this a wholly moot point.
Heck, I have a different email address for everything I sign up for online, why not have a different credit card for each merchant?
Re:Price manipulation by consumers (Score:3, Informative)
I know you ask in jest, but for those who don't know the right asnwer, here's why:
BAD CREDIT RATING!
I have just requested my credit report this year, and in the list of parameters affecting your credit rating with major credit bureaus is "excessive lines of credit". It is HIGHLY recommended not to keep too many open credit cards if you want to have a good credit rating
Re:Price manipulation by consumers (Score:5, Interesting)
Yes, it could, thus the only reason I don't really feel all that concerned about the possibility of vastly different prices for different people.
Not just online, though, but more importantly, in the real world as well. From the article, for example, it talks about the diehard Coke drinker paying twice as much because the company will exploit his preference. Easy solution? Find a similarly diehard Pepsi fan, and each buy the other's soda for them. So both pay less than the mean rate, as the respective companies try to lure each over to their own product with extremely discounted prices.
Now, in some situations this wouldn't work. But for anything costing more than a few bucks (electronics, for example), "shopping around" would go from "check pricewatch" to "ask grandma (or someone who would normally have significantly different buying habits than yourself) how much she can get that great new toy for".
Finally, a way to screw corporate America with their own tools of torture. Bring it on!
Re:Price manipulation by consumers (Score:2)
Sure, sellers always had credit reports, but that was usually used
Re:Price manipulation by consumers (Score:3, Interesting)
Re:Price manipulation by consumers (Score:3, Interesting)
Nevertheless, I'm unconcerned about this. If you consent to paying $n for a widget, then don't complain. If you want to complain, then don't consent. People just need to learn how to Just Say No to prices that they think are unfair. It's like when I h
Ad fun (Score:5, Funny)
You stop by CNN.com, and a pop-up flashes on screen: "Hello, Mr Thompson, you look like you could use a bigger penis!"
So... does this mean (Score:5, Funny)
If so, I'm all for it.
Re:So... does this mean (Score:5, Insightful)
Not really... I mean, sure he could get charged $1000 for a pack uf gum, but this is still capitalism we're talking about here. If you try to charge him $1000, then I'll ofer him $999. But then, someone else will be willing to sell it to him for $800. Eventually, the price will be driven back down to where it would have been anyways. That's how capitalism works. Even if we all know that he is suer rich, we all want to get the sale, and all it takes is one person to be charging $1.50, and then we all have to affer comparative prices, or we'll go out of business.
Re:So... does this mean (Score:3, Insightful)
THAT'S how capitalism really works.
Re:So... does this mean (Score:3, Insightful)
Has baggins ever eschewed the can of cheap cola for Coke or Pepsi for twice the price? Does baggins wear spiffy Nikes or Adidas, or does he wear plaebian Payless shoes, as Adam Smith would hope he wears?
Advertising works on the principal that human emotion is as powerful as human reasoning, something that Adam Smith does not fully appreciate, but is recognized in neo-classical economics and more developed in Keynsian models.
Consumer Grou
Plenty of options other than privacy (Score:5, Insightful)
People also have to realize that price descrimination is and has been all around us for a very long time. Coupons, "daily specials", business-class travel, etc. are all examples of this. There should be plenty of opportunities to increase price descrimination without impacting customer privacy (i.e. the temperature-sensitive drink machine in the article).
It can easily be abused by unscupulous merchants (Score:4, Insightful)
And imagine the poor diabetic about to go into insulin shock at the pharmacy, why, they'd pay treble to stave off a medical emergency.
Now, a nice sense of business ethics, based on such hokey premises such as "Thou Shalt Not Steal" might mitigate this, but I have trouble imagining it in our liberalist society.
Re:It can easily be abused by unscupulous merchant (Score:5, Interesting)
Until an unplanned meeting with some black ice and a nearby tree, I used to own a Jaguar XJR. Now, big luxury cars depreciate fast and this Jaguar was seven years' old at the time of its demise. In other words, most people's year-old hatchbacks cost more than this car's second-hand value.
Despite that, the majority of people I dealt with who saw the car decided that I was obviously stinking rich, available to be fleeced and took the opportunity to try and rip me off. This would include car mechanics to a small extent (it was main-dealer serviced most of the time, you get ripped off there anyway) but also to workman calling at the house. Prices quoted for the same job varied enormously depending on whether I left the Jaguar parked outside the front or whether we left the MX-5 (Eunos Roadster/Miata by another name) parked outside.
Price discrimination? Yep, know all about that.
Cheers,
Ian
Perhaps they were aware of the Jag's reputation (Score:2, Funny)
Re:Perhaps they were aware of the Jag's reputation (Score:2)
Oh, you've driven one then...? :-)
Yep, you're right. Decided I must suffer for my art...
Well, you're right for the XJ40s and early X300s. Not with the later X300s and the new X350s though (all sold under the name of XJ6/XJ8) - they're as up to date and reliable as anything else.
Cheers,
Ian
Re:It can easily be abused by unscupulous merchant (Score:5, Insightful)
In the case of the taxi driver, remember that prices can't get too high, because (in the absence of collusion) otherwise other taxis would step in, at a price approximating their actual cost, not the benefit to the consumer, under perfect competition.
There are some laws limiting price discrimination. The most widely discussed is the rule of maritime law that a salvage ship can only charge a reasonable price, even if it's the only one around and gets the sinking ship's owner to promise something higher. There is extensive economic analysis of such rules; the general conclusion is that they are not useful, subject to the usual long list of exceptions.
There's a broader question, though. Suppose price gauging is "immoral" according to our common sense but its existence in a particular case is Pareto efficient: that is, it makes everyone in the world better off. Utilitarians would say that, in such a case, we are obligated to discard our moral intuition to make everyone better off. Do you disagree?
Re:It can easily be abused by unscupulous merchant (Score:4, Interesting)
I can't recall the user, but someone here at
Market manipulation replacing market innovation (Score:2)
I guess I see business as putting too much intellectual capital into market manipulation -- be it discriminatory pricing, intellectual property machinations, accounting manipulation -- and not putting enough intellectual capital into making better products that people want.
It seems that it's become perfectly legitimate -- if not *more* l
Re:It can easily be abused by unscupulous merchant (Score:2)
And you know what? I wouldn't have a problem with it. Frankly, black leaders need to get up off their asses and get to work on the problem of black crime. Blacks are as much more likely to commit crimes than whites as men are than women. The black crime rate has always been bad, yes, but it hasn't been this bad. If you look at the statistics, poverty doesn't begin to explain it. It'
Re:It can easily be abused by unscupulous merchant (Score:2)
Liberalism has nothing to do with it. Those with the money buy their way into influence. The rest of the sheeple are conned into buying into a "profit at any price" mentality.
Just listen to Microsoft apologists.
Relative Payment, Free Economy (Score:2, Interesting)
It's sort of like a builtin tax system. Taxing is relative to the amount you make,
Not entirely new... (Score:5, Insightful)
"So, I'd like to buy a lamp. I'll pay a dirham for it."
"Bah, this lamp is made of the finest brass, five dirhams is the least I can accept!"
"Eh... out of pity, I might be persuaded to go as high as two dirhams."
"Sir, I can see you are a man of discriminating taste. As a special favor, I will let it go for three dirhams."
"Done, provided the lamp is filled with oil."
"You drive a hard bargain sir. Done."
Re:Not entirely new... (Score:2)
Bartering (Score:4, Interesting)
I can remember shopping in the Philippines- each clerk had a calculator in hand to show you the price of an item- so that other customers would not over hear. Each transaction stood on its own and you might do better or worse than the person standing next to you.
Obligatory Monty Python Reference (Score:2, Funny)
Re: Not entirely new... (Score:5, Insightful)
But in the corporate cases we're talking about, corporates will set the price they think you'll pay, and you can either like it or lump it. No haggling, no discussion, no chance to influence the seller in any way (except long-term, statistically, which is no help in a single transaction).
Hardly comparable.
Differential Slashdot Subscription pricing next? (Score:5, Interesting)
Actually, my last job was as a pricing analyst, and it was all about this topic. How to price differentiate while staying within the bounds of the law. Arguably this increases overall economic efficiency.
Felt kind of weird, however, trying to figure out how to wring every possible penny out of the small buyers but coming back, while at the same time keeping the national accounts in check with huge price reductions (50% or more). The 3rd factor is making sure that the little guys never knew about the big boy pricing, or at least never knew more than the fact that buying more could be a positive thing for their own price structure.
Keeping small guy prices high is easy.
Keeping big guy prices low is easy.
Keeping the both happy customers is not.
Re:Differential Slashdot Subscription pricing next (Score:2)
Slashdot offer two product variants, one free with ads, one paid withous ads, both the same price to everyone. It's quite different.
Potential for Abuse (Score:4, Interesting)
Re:Potential for Abuse (Score:2)
What makes the fact that it's done online different than IRL?
I agree with that this provides for substantial potential for abuse. However, as the example cited in the paper of Coke machines and the price-adjusting according to temperature, proves that it's really a matter of spin. Had Coca-Cola successfully controlled the media surrounding it, they may have been able to get away with it.
I think that all people have a a general sense of what's fair. And while it may
Re:Potential for Abuse (Score:2)
But why/em?. Companies are profit making entities, and French/Arab money is as good as any other. Racisim by companies is racism by individuals exerted through their company power.
If they want to be prejudiced, other mechanisms as good/bad/illegal as pricing are available.
Software Piracy (Score:5, Funny)
Artificial Barriers to Trade (Score:4, Interesting)
Of course, barring poor legislation, there are always ways around this sort of thing. If $product is available somewhere for less, I will be able to find it somehow (thank you Internet!) regardless of a corporation's efforts to trick me into paying more.
Right now, I have a region-free DVD player (flashed APEX), a region-free PS1 (stealth chipped), etc...
Geeks always win.
Re:Artificial Barriers to Trade (Score:2)
Well, they would win, except their toy budget far exceeds those of any non-geek.
Nothing new (Score:3, Interesting)
Good Thing (Score:2, Interesting)
Re:Good Thing (Score:2, Insightful)
Good! Now I wont get 'weight loss pills' spam (Score:2, Funny)
Victoria's Secret... (Score:2)
It caused a big whinge fest a few years ago.
Re:Victoria's Secret... (Score:2)
Buying another type of meat... (Score:5, Interesting)
When I got married, my wife didn't believe this until I did some comparison shopping with her. I suspect this is true in other cities as well.
myke
Andrew Odlyzko (Score:2, Offtopic)
'Perfect Information' (Score:4, Insightful)
It seems that companies claiming prices as 'confidential' want it all their own way. That doesn't seems like a very pure form of capitalism.
Well duh...it seems like a no-brainer (Score:3, Insightful)
The thing that makes me wonder though, when they say "targeted pricing", do they mean blatantly open about giving me price A and John Doe gets it for price B? It's done behind the scenes already. Sure there'll be a "suggested price" price most companies go "oh, you're from Chili's, so you get this price" and such. Hell, the rental car industry has such a slew of different prices, based on if you're renting it for pleasure, if it's a corporate rental, if your car is in the shop, if it's an insurance rental, and so on. I dunno...this just seems like a no-brainer to me and doesn't surprise me at all.
Examples of Price Discrimination (Score:5, Interesting)
It pisses me off every time I'm in a store, but I only get really angry when the checker says something like 'Sir, you would have saved $15 on this purchase if you had used your discount card. Would you like me to give you one now that I'll use for this purchase.' If I have to pay outrageous fines to maintain my privacy, I'd rather not know how outrageous they are.
Recently (probably as complaints have risen from my demographic), most of upscale markets in our area have started granting the discount anyway if you tell them that you value your privacy, and they swipe a register card instead. Presumably they now are collecting data on privacy freaks, but at least it is as a group rather than as individuals.
Re:Examples of Price Discrimination (Score:5, Informative)
I filled out my super-duper-saver card with false info. I get my Mountain Dew on the cheap, they get broken demographic data.
I giggle every time they swipe that thing. It's just such a sham.
Re:Examples of Price Discrimination (Score:5, Funny)
-Ab.
Re:Examples of Price Discrimination (Score:4, Funny)
The idea offends, but... (Score:4, Insightful)
Think about it this way: two buyers, based on their collected information, are offered DVDs at wildly differing prices. Say buyer one gets said DVD for $1, but buyer two gets it for $10. Both are satisfied, buyer one because it feels really cheap and buyer two because he loves the movie.
Assuming the buyers never converse about the price they paid, both will be satisfied with the exchange value of the DVD, despite buyer two's costs being 10 times his compatriot's.
Ironically, if the two buyers did share price information, buyer two would immediately become irate, knowing that he could have had a better deal. Then again, it's possible that he might just shrug and say, "it was still worth it." I think it just puts the onus on the shopper to be as informed as possible about the value of their purchase and on the seller to make sure their discriminatory pricing doesn't leak out.
I couldn't find a link to it (old story), but the class ring company Josten's had different pricing scales for inner city and suburban school in the Minneapolis-St. Paul metropolitan area a few years back. The shit hit the fan when the media caught wind. Ironically, I don't know that they ever changed their pricing scheme.
Privacy == consumer empowerment (Score:5, Insightful)
The tactics he tried were set up to catch people of decreasing stupidity, but, because he didn't know who I was, he had no choice but to make guesses about my intelligence and willingness to spend money. This means I was slightly empowered as a consumer, and the deck wasn't entirely stacked in the dealer's favor.
Now, imagine if the salesman had access to my entire purchasing history. If you think salespeople are agressive now, I don't want to imagine what it will be like if they use our own experience against us! The credit score is already bad enough as it is.
Price Gouging? (Score:2)
Pardon the spelling, but isn't Price gouging illegal? I remember after the Gulf War II started, several nearby gas stations threw the gas prices up 20-30 cents more per gallon. Then there were threats of fining and such.
Difference in soda and gas...but the theory is the same.
Only if you pay cash == privacy (Score:4, Interesting)
Mr Odlyzco's Economic Opinion is Way Off (Score:5, Informative)
Hoo boy, Where did that come from? Not only is that statement wrong, it is so fundamentally wrong I can't believe that anyone would interview this guy (obviously they haven't published his paper).
All beneficial aspects of market economics is based upon a "market clearing price." The "efficient market" is based upon a market like the New York stock exchange. The market clearing price is what drives down prices, and gives us what is called the "consumer surplus."
Price discrimination only results in higher output for a monopolist--because the monopolist makes his profit from restricting supply. The highest output is always achieved from a perfect market in which the price is driven down to the marginal cost per unit.
Only a monopolist can engage in true price discrimination, but all vendors wish to create "limited" monopolies and get price discrimination to certain degrees. Limited monopolies can be created through brand IDs, location, government franchise, patent and copywrite, being first to market, and so forth.
Price discrimination in airline fares is a complex intertwining of federal governement regulation, local airport regulation, kickbacks (where the flyer is not paying the fare), obfuscation and fraud.
If price discrimination were the rule, we would pay more for water than we do for wine. Every life-saving or limb saving medical operation would require the patient to file bankruptcy and pay every penny to the hospital because bankruptcy would always be preferable to losing an arm.
No prices would ever be posted anywhere. We would negotiate the price of every single purchase--including every hamburger and every Coke (his example).
It is this bleak vision that lead to over half of the world choosing communism in the first half of the century. It is the open market, that gives us our prosperity.
The issues of price discimination, monopolies and limited monopolies are so well documented that it is puzzling that Business Week would even think it worth while to interview this guy. In any case, it is pretty clear that after taking Econ 101, Mt. Odlyzco dropped out halfway through econ 102
Price targeting a good thing? (Score:3, Interesting)
Right now, the warez and mp3 and all of those things exist because college students and others do not have the funds to buy all of the media and copyrighted material they want access to. There is a glut of material on the market, all priced exactly the same.
Targeted pricing would allow media companies, pharmeceutical companies, and anyone else to sell to someone at the appropriate amount for their economic group, background, and other things factored into this.
theoretically, in an abuse free system, targeted pricing could be the answer to many of the current social problems in a market where everything is set at the same price.
Right now, development of drugs is funded by the pockets of rich nations. IP laws keep small and poor nations from producing these medications for their citizens. One shining example of this is aids medication. If a system were developed to encourage targeted pricing, then it could conceivably still fund R&D while providing people with what they need.
This also applies to getting what people want, with copyrighted media. Targeted pricing would allow for the college student and others to get legal access to media they want access to, and apply appropriate pricing to those with more economic power.
it really sounds ideal to me. however it has major problems.... privacy, and trusting those in charge. both of which are impossibilities.
conversely, we've already lost all of our privacy, and those in charge are corrupt anyway, so its not like we have anything to lose either way.
Price Discrimination, an example (Score:4, Informative)
The tourist McDonalds has no Value Menu; the regular one does. This is common practice, and it is up to the consumer to avoid rip-offs.
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Karma (Score:5, Funny)
Your sucker rating will haunt you like your credit rating. Now is the time to start being shrewd, before you build up a reputation a big fat sucker.
Targetted pricing good for the proletariat (Score:3, Interesting)
This will allow them to charge the wealthy what they are willing to pay for a product (more) and charge everyone else what they can afford to pay for a product (less).
So, capitalism will, due to targetted pricing, become the self regulating thing that it should be and finally narrow the gap if not between the rich and the poor, at least between the haves and the have nots with more equal distribution of goods due to pricing pressures.
(seems kind of ridiculous, eh? This is the logical conclusion of what people are paniced about. The fact is that targetted pricing is a fad and will amount to nothing because markets work at a macro level and will force *all* prices to competetive levels)
Convince Big Bro that you're a poor, cheap bastard (Score:4, Insightful)
Much of the social status of being rich (vs. poor) comes from the blow-through-the-dough-and-don't-have-to-care (vs. sweating every penny) lifestyle & attitude. This system ain't much different from a bazaar 3000 years ago - the merchants knew perfectly well who was rich and who was poor.
OK, this may seem obvious, but... (Score:5, Interesting)
- Product appeal
- Convenience
- Value (or apparent value). Why do you think all those do-dads on TV include "free" items? To build value into otherwise worthless junk.
- Impulse purchase
- Level of trust
- Time limited offers
Any experienced on-line purchaser or consumer usually has a rough idea how much certain items are worth, i.e. CDs, movies, etc. This is why I don't think price discrimination will feature large differences is price. It's easy enough just to call down to my favorite music store and ask how much a particular movie or CD is before I purchase on-line, or check other web sites. The point is, comparison shop. If you shop around, the most a price discriminator could get away with is a few dollars, not the amounts that some people have indicated here, but YOU HAVE TO SHOP AROUND. Whenever I am considering a large on-line purchase, I compare the price to what is offered at a local store.
The problem, of course, with shopping around is it entails effort and many want the web to be effortless, so they impulse buy or worse yet trust the deal that's offered to them without shopping. It's the same in the real world, you have to comparison shop.
What I think you will find instead of huge price fluctuations is package deals and specials tailored to the individual consumer. I see nothing wrong with that, actually it quite appeals to me. I regularly receive specials from an on-line electronics dealer that I frequent and have taken advantage of quite a few of these specials, after comparing prices first.
My 2 cents.
Hampering entries into the market (Score:3, Interesting)
Imagine that Amazon.com succeeds in charging you exactly what you'll pay for. This means that you'll see their price, you'll consider it, and, WHAM, you'll click on the patented, novel, Buy(TM) button.
Now imagine that a new, energetic startup, Nile.com, decides that it wants to enter the internet book-selling market. It, not having the resources that Amazon has, is forced to use a "one-price-fits-all" strategy. Nile, by the laws of economics, will not be as efficient. And less efficient companies will lose out to more efficient ones, again, according to the laws of economics.
So all Amazon.com has to do to prevent Nile.com from gaining market share is operate at a high efficiency whenever there's a competitor. Once the competitors are toast it can go back to acting like a monopoly. The difference here is that NO ONE WILL EVER KNOW. If you don't know what price your neighbor paid, how can you claim that they've raised prices? Especially in a world where raising prices can actually mean not lowering consumer prices when distributor prices fall.
You're always happy with Amazon's price (remember this is a perfect price discrimination structure), so there's no incentive to look elsewhere. Amazon.com just keeps the excess profit from falling prices and only lowers them when new companies enter the field.
Bingo, a perpetual monopoly, one that can't be broken by anti-trust laws and investigations. Or am I seriously wrong in my theorizing?
Amazon already tried this (Score:3, Interesting)
There was a customer uproar and a threat of a class action suit. They publicly recanted and said "never again."
Capitalism? HOW? (Score:3, Interesting)
Assume for a moment that consumers place the highest value on specific goods, like water, food, housing, and transportation. Assume also that fringe goods (computers, clothes, entertainment) must, by definition, be valued lower than more basic goods. In an economy where pricing of basic services is discriminatory, the providers of basic goods will be able to raise their prices on an individual basis, according to the consumer's ability to pay.
Given the nature of these goods, the providers should be able to raise their prices to consume all of their customers' available income. There are no substitutes for these goods, and if there were, presumably they would be priced similarly.
In this extremist's scenario, *everyone* would be living below the poverty level, with NO discretionary income. All of their income would be consumed in purchasing these most basic services. And what would the companies be gaining from this? Nothing -- all their money would just mean they pay more for their basic goods and services. Sounds a lot like communism to me, but this would gradually degrade into an agricultural society as people lose their jobs when no one buys their products.
In a less extreme scenario, the disparate discretionary income of consumers at different income levels would, in theory, be able to purchase only the exact same relative value of goods and services, even the CEO's of the megalithic corporations with all their money. Wow. That still sounds like communism.
Capitalism is built on my ability to consume more than you because I (presumably) contribute more to society than you, or vice versa. Anything that upsets this delicate imbalance undermines our very way of life. I will grant you, though, that this is a great argument against Adam Smith's "Invisible Hand".
--Jasin Natael
Re:Advertisers can.... (Score:2)
Re:Advertisers can.... (Score:3, Interesting)
So things like the bandwagon tactic (convincing you to do/think what everyone else is because everyone else is doing so) don't work on you, eh?
As you sit on Slashdot and join half the people on here in griping about privacy?
Advertising definitely works. If you see a brand frequently, people tend to consider said brand more reputable.
Re:face reality (Score:2)
Retro-mercials on TVLand really put this situation into perspective quite nicely.