Which Price is Right?

slashdotNum2Big2Register writes "An interesting article at fastcompany about how things are being priced nowadays. The only drawback that concerns me is how each item and price can be connected to an individual. Amazon was already found to be doing this with their prices."

Comments

Re:nowadays = September of 2000?

[luzrek]

The article about Amazon was from September of 2000 - after which they stopped doing it.

Not true, in December 2002 we wanted to buy the Band of Brothers video collection for my grandfather-in-law. When my wife and I looked at it (we are frequent amazon.com customers) it was $80. When my mother-in-law (doesn't shop online) looked at it it was $100. Ergo, Amazon.com still does the individualized pricing thing.

The individualized price thing was commonly done in retail until Sears and Roebuck introduced the single price concept near the beginning of the 20th century, allowing them to have more poorly trained sales staff therefore allowing them to make lots of stores very quickly. Very high end and very small volume stores have never stopped doing it since the salesmen/owners at these stores ussually have a good idea what prices their customers can tollerate. Large stores couldn't get to know the customers well enough to do this. Looks like large stores track you well enough to do this now.

Fleecing the poor

[SpikeSpiff]

At first I read this as a troll. But I think the issue here is that the poster does not recognize that risk costs money.

Financial services to the poor have, all else equal, much higher default risk. And default costs swamp everything else. Consider that the margin over cost of funds for most consumer credit is 2-3%. A default rate of 1% destroys the profitability.

And the proof of this is in the market. Credit companies are neither bashful nor shy. If there was money to make, your friends and Cap One and First USA would divert some of 1 billion or so peices of mail then send. Alliance capital tried and went bankrupt. Cap One tried, but was punished in the stock market for the risk.

The other minor effect is transaction costs. There is a smaller denominator to spread costs across. 1% of an $800 paycheck is different than 1% of a $200,000 mutual fund purchase.

This reminds of the myth about women being paid around 70% of what men are. If true, there must be someone out there hiring only women and killing their competitors with wildly lower labor costs. Ought to be easy, women are around 40% of the labor pool.

Oops. Doesn't seem to be happening. I know I'm willing to try it.

Shop at the dollar store

[idiotnot]

That way, you never have to worry about prices.

But seriously, objective pricing probably is gone. Why? Well, we've transitioned to a service-based economy, and it's difficult to stick a price label on an intangible product (intellectual property, anyone?).

What makes a copy of XP Pro worth $299? Nothing. The box and the disks themselves are probably only worth a few bucks. And people know that MS runs 85% margins on these things, but still continues to buy them. And when so much of the economy is based on sales of intangibles....

Same goes for getting work done on your car. How much money does a head gasket cost? Well, the gasket, itself, is under fifty dollars. How much does a head gasket job cost? That's a different question entirely, now isn't it?

airlines created their own mess by chaning prices

[bhdaly]

"Collectively the airlines change prices 75,000 times a day". All airline customers have been trained to shop around because of this. There is no company or brand loyalty because the customer knows if they dont shop for price they WILL get screwed. Instead of focusing every cent on how to undercut every other supplier, try providing the customers with quality service at affordable and consistently affordable rates. Customers do not want to be in the price shopping business. That is a lot of work. They want a ticket at a reasonable price. If one airline gave consistently affordable rates and decent service, customers would come back to that airline with confidence instead of changing airlines everytime because of a price blip. That is not possible with the current environment where the same airline will charge you $1000 more depending on some whim from a competitor. And this is touted as science?

Wal*Mart vs. Microsoft

[Animats]

That's what the Lindows thing is all about. That One Nation under Wal-Mart article says

• What else? Well, what about Microsoft? Its margins are--can this be right?--44%, and it's sitting on $38 billion in cash. Mr. Sam would not approve. Log on to walmart.com and you'll find $199 computers powered by a fledgling Windows competitor, Lindows.

That's the Wal-Mart position. Either Microsoft is going to have to cut their prices, margins, and profits, or Wal-Mart is going to undersell them with Lindows. It's going to be an interesting battle. The outcome may be a special low-end version of Windows for Wal-Mart.

This is important for open source. Wal-Mart likes generic products and price competition. No one supplier gets 100% of a product category at Wal-Mart. Start thinking "Linux for Joe Sixpack".

Best explanation of price discrimination

[pjc50]

http://www.vanderbilt.edu/Law/lawreview/vol536/boy le.pdf

James Boyle is, apart from being a very smart economist, one of the Good Guys in the copyright debate. His paper explains why price discrimination happens and some of the effects it produces.

Rehash

[urbazewski]

This reminds of the myth about women being paid around 70% of what men are. If true, there must be someone out there hiring only women and killing their competitors with wildly lower labor costs.

This is rehash of an old, flawed argument:

1) Assume that the labor market is perfectly competitive.
2) Assume that competitive markets will eliminate wage disparities between equally qualified men and women.
3) Observe that wage disparity exists between men and women.
4) Conclude that "unobserved differences" between men and women explain the wage disparity.

What justification is there for assumptions 1 & 2?

One point of the article is that businesses can make themselves better off by segmenting the market and selling products to different people for different prices. If businesses can do this when it comes to selling products, why can't they do the same for buy products, like say, labor?

The argument that markets will eliminate wage differentials based on gender or race assumes perfectly competitive markets composed of identical goods with many anonymous buyers and many anonymous sellers with full information available about the quality of the products and all prices. Every single one of these conditions is absent in the labor market.