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

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.

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".

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.