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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."
The idea of pricing products is to charge every consumer the maximum amount they're willing to pay. The trick is that it's usually very hard to have a purshasing system that allows such price variance. Airline pricing is one example - the closer you are to the date you wish to fly, the higher the price. (This is a vast oversimplification, but you get the idea). This is because business travelers, who need to fly at a moment's notice, are willig to pay much more than a recreational traveler, who's planning vacations 6 months in advance and shopping for the best deal. Businesses like Amazone are going to try and use every edge they can to increase their margins. From their point of view it's a great idea to use the technology they already have.
"Moderate drinking can help prevent amputated limbs" -- Abigail Zuger, NYTimes, 12/31/02
"The only drawback that concerns me is how each item and price can be connected to an individual."
.. Anyway, its just an idea! ..
Should this come to pass on a widespread basis, it could be counteracted by some sort of open pricing network, similar to P2P.
Somehow the system knows what prices I can get for an item, and what prices anybody else logged in can get, and routes the purchase through that person...
Similar to pricewatch, but more community based rather than retailer based...
An online Starcraft RPG? Only at
Online Starcraft RPG? At
Dietary fiber is like asynchronous IO-- Non-blocking!
Not quite individual level, but we get many catalogs for previous occupants of our current office space. Dell, in particular, sends multiple catalogs here. What I found very interesting is that 2 Dell catalogs - indentical in products offered - often have different pricing based on the recipient. The even more interesting thing is that both recipients worked for the same company at the same time, but one was male and one was female, and they were being offered at different prices. The 'product code' was the same, but the 'catalog code' (or something like it) was different. I can not remember if the prices were higher for the male or the female - sorry...
creation science book
There are a few forums I used to frequent, one for webmasters. It was mostly freelancers or one-man shops, from what I could tell, but the forum moderators were strict to the point of being stupid over 'pricing discussions'. "We can be sued for supporting price fixing" is the standard response.
One person asked what it was customary to charge for a certain type of service. I replied back that I've seen people charge anywhere from $50 to $1500. *THAT* was considered 'potential price fixing'. How a number with a variation of hundreds of percents could be 'fixed' is well beyond my comprehension.
You'd think then that magazines or websites which have pricing on them (like, for example, ecommerce sites) would be collaborating in price fixing, as they can see info from other companies, and those companies can see their info, and adjust things accordingly.
There's a difference between knowing what someone else charges and actively engaging numerous people to all sell at a particular price, but people don't seem to see the difference.
creation science book
And thanks to me, they get a killer deal on shipping due to a little known program known as consignment shipping via UPS so they pay less than half of what they normally would pay; though they charge you for the full price of shipping, nearly all of this money goes straight into their pocket. They now claim it is for the manpower to ship your book but I have an Uncle that works for the warehouse down in Nevada and gets paid minimum and the time it takes to fill an order is less than 3 minutes ($10/hr x 3 seconds = approx 0.75).
Now, they then charge full price and have items that they overstocked pull up higher in searches with edited customer reviews to make them appear better than they are. True fact. They started editing reviews back when I was there.
Oh the horror stories I could tell...
"...people just like the feel of a dead tree in their hands." -Jeff Bezos
Then on top of that
This is my sig. There are many like it but this one is mine.
Haven't beefed up on Ricardo or Smith recently, but is this how supply and demand is supposed to work?
Sure, the ultra-rational producer is there, but my understanding was that the system was designed to ensure efficiency by forcing producers to increase the marginal value they're providing by securing efficiencies in their supply chain. So clothing chain A is not doing well because it sells "overpriced" products relative to chain B, so chain A is required to secure cheaper or superior manufacturers for their products (often through the use of technology). Cost minimization vs. price maximization. I'm somewhat at a loss to see how these technological efficiencies can be developed by price maximization. Is this the phenomenon Kenneth Galbraith was bemoaning over 30 years ago? Is this not just a formula for inflation with no discernable improvement in living standards?
Until doing so is declared a violation of the USA Patriot Act, sure. At least at the moment in the US we still have a concept called the First Amendment. There is no legal concept of "off the record" - it is just a professional courtesy between people who make the news and those who report. All it means is, 'if you publish this I will only talk to your competition from now on'.
For the moment anyway. It would not surprise me a bit to see organizations trying to use laws such as USA Patriot (particularly version II) to censor reporting that they don't like. But not yet.
sPh
There are a lot of posts worrying about business collusion, but what about customer collusion? A site like PriceWatch should be able to go through a website and collect prices under different profiles.
Then, as a customer, I might get a little annoyed knowing that a company is trying to sell me a book for $20 when I know Person X can get it for $15.
Adidas To Bring Back Sneakernet
I can go anywhere I want to buy anything amazon has to offer me. The internet allows me to shop around with minimal effort. "Memory sticks are $52 at amazon? Well I saw them at compusa for $42"
I'm not worried about this because I don't shop and expect to get the lowest price unless I do some work. That amount of work has lessend with pricewatch and other deal sites, and this is where I think technology is hurting companies. Its too bad that neither article mentioned this, I would like to see how they plan on combatting it. Remember when "price matching" was all the rage?
I mean, amazon.com's prices are usually very flexible, they flood the market with coupon codes, free shipping, and so what if they charge more to an idiot who is willing to pay it. If they notice you're only buying the things that you see as being cheapest from them they'll realize whats up or their software isn't worth jack.
It's called "discriminatory pricing", and is not at all illegal or unethical. Look at your local movie theater. Say they charge $2 for kids and $7 for adults. Why? Because they'd have a family of four pay $18 dollars, rather than that family not go at all because it's $28. 1 x $18 > 0 x $28
Same thing with cheap night. Tuesdays, all seats are $2, because they'd rather have some people at $2/seat, rather than no people at $7/seat.
What really baffles me is that people think they're entitled to know what goes on behind the scenes when businesses set prices, or base buying decisions on that. "They're charging $7 for shipping when it only costs then a dollar!" So what? Is the total value of getting the items to your house worth it, or isn't it?
And no, SuperBank isn't going to jump in to the low end market just because there is a profit to be made, for two reasons: historical under-the-table handshake agreements not to do so (see Crabgrass Frontier, referenced in another post, for an example of how this was done with home mortgages for 90 years) and the fact that buttoned down, upper-middle-class bankers flat out don't like to do business in less savory neighborhoods. If they don't feel comfortable driving the BMW there, they won't make a loan there either, regardless of the potential profit.
sPh
And no, it wasn't a pr0n site.
11/30/1998:
So the same computer that will
transmit you a reminder to buy
hamburger buns when you pick
up the patties will raise prices
for you as you approach the
lettuce. If your desire for a
lettuce purchase lags, you'll be
stimulated by additional
promotions designed to whet your
appetite. The supermarket will
be alive, and the deities that
govern it will operate in real
time.
I wouldn't recommend instituting a 'women-only' hiring policy, unless you feel like running afoul of Equal Opportunity Employment regulations...
Personally, I've paid $3+ for a bottle of water before, usually b/c I'm really thirsty and that's the only option. Now, if I'm dieing due to dehydration, it's certainly immoral to charge more than a fair/ standard price. Otherwise, let me make the decision.
Last note on bottled drink prices. They are expensive at sporting events, airports and rock concerts. Why? Scarcity of supply, which drives up prices, increases profits, which either go to maintain the airport and line the owner's pockets;. Note that the vendor doesn't relly make a killing. The rent (and other fixed costs) that he pays reflect the fact that he can maintain very high profit margins. I have no problem with that.
However, it makes my blood boil when I go to an event or place that charges $4+ for any sort of drink, and does not have drinking fountains available. I think it's a matter of time before some public parks decide to remove their water fountains (at some indeterminable savings), and gives the monopoly soft-drink contract to Coke or Pepsi, who then proceed to charge $1 for every drink in a public place. The park rangers/ city councilors will claim it's a win-win-win b/c 1) The city "saves" money by removing the water fountains, 2) the city is paid for giving the monopoly contract, 3) the consumers have a wider variety of drink choice! HAH!
I'd actually be fine with the scenario if there were no monopoly contract, b/c then the pricing would likely be reasonable. Ever notice how cheap Coke is in a Coke machine when it's next to a Pepsi machine? That's why the vendor wants the monopoly contract, and why public entities should NEVER give a true monopoly soft-drink contract (i.e, monopoly contract and water fountain removal).
First, just for kicks, I'd like to see an example of a 10,000% difference in credit cost. A very cheap mortgage, one of the cheapest of consumer credits, is about 6%, all in. That would mean there is someone charging 600% to some poor devil. Doubtful--yes, illegal--almost certainly. If you're talking about "no interest" car loans, you should read the financial statements of a car company with a finance division, and try to seperate credit cost from price. You'll find that the credit cost GMAC records is not what you see in the flashy Pontiac ad.
Second, plenty of SuperBanks are trying to do business in less affluent neighborhoods while making money, but quietly. For instance, many large banks have been trying to buy into the storefront check cashing business. They try to stay low profile because the vig these places extract is insultingly high, and they don't want to insult anyone. On the other hand, if they opened their own, they realize they could not charge much less and make money.
There are plenty of places that even you wouldn't want to drive your car (despite your superior attitude) that greedy capitalists have been happy to invest in--think Nigeria, Colombia and some of the grittier ex-Soviet republics: you will certainly see the familiar red of the Coca-Cola logo and perhaps the golden arches, and you probably won't see the oil/arms company exec behind the tinted glass of his armored Mercedes.
If there is money to be made, believe me, someone will be there to make it.
Milo
This has no impact on the arguement at a Micro-Economic level.
Hypothetically, imagine that you are a clever entrepreneur, and start your own restaurant. The restaurant is doing well, so you decide to hire a IT person. You advertise on Monster and get 50 resumes. (In this economy you get 500 resumes). You winnow the list to the 10 qualified applicants, and then discover that 4 of them want 30% less money. Which do you hire?
This decision certainly does not depend on anonymity, identical applicants, or PERFECT competition. It just depends on smart people doing a good job of hiring.
I don't believe that we have a gender gap in productivity or ability. I believe we have a statistics gap.
"All that is required for evil to triumph is for good men to do nothing." - Edmund Burke
As copyright owner of this comment, I authorize everyone to defeat any technological measure which limits access to it.
Alan is willing to write a report about something, say electronic money, if he can make $1500 on it.
Betty is willing to pay $1000 for the report.
Charlie is willing to pay $700 for the report.
If Alan were to charge $700, both people would buy the report, but he wouldn't make his $1500 so he wouldn't produce it.
How about instead, he charges:
Betty $950
Charlie $650
Now both customers get a price break from what they were willing to pay, and Alan gets an additional $100. And something of value was created that otherwise might not have been. So is this a good thing?
Second, with reference to the airline pricing business, how do services like priceline work? You can basically book arbitrarily long in advance (within the 330 day limit), but you get your prices accepted pretty early on, even when there is a chance the airline could charge a premium for your seat.
The airline pricing industry is a racket indeed, because for instance, flying from Boston to Chicago is more expensive than flying from Boston to Milwaukee!
That is the opposite of price gouging. The were so aggressively low fee/price that they were nearly bankrupted by a minor economic downturn.
"All that is required for evil to triumph is for good men to do nothing." - Edmund Burke
There is no company or brand loyalty because the customer knows if they dont shop for price they WILL get screwed.
:-) . Fact is, it's very hard to sell expensive first class seats to latin america, in comparison to europe, so the airlines can only try to make a profit on economy class. Which is exactly what they do with fares that seem abnormally high for the distance traveled. (I should add that fares to latin america are some of the most stable...they barely move up or down, and we've paid the same price, within $100, 90% of the time we've gone there, for the last 20 years. Clearly it's getting slightly cheaper with time, but it's pretty stable.)
For the most part, airline service is not differentiable...though there does seem to be an observable difference between the low quality carriers and the high quality carriers on service and on-time performance. But that isn't known to your leisure travellers, who shop entirely by price, unless they have had some abnormally negative experience on carrier X. I need not tell you that everyone and their grandmother tries to book a trip somewhere, the first thing they ask about is price.
Having said that, leisure travellers simply aren't profitable, or you need a hell of a lot of them before the flight at least breaks even. Your supersaver 21 day advance fares are a loss to the airline. (Incidentally, the consistency in airline fares come from the fact that everyone knows that fares go up the closer you are to the travel date. On a side note, the expansion of the complexity of supersaver fares is how checking for photo ID was introduced--it never had anything to do with security, it had to do with making sure that person X wasn't buying a ticket in advance that they had no intention to use, to sell to person Y who suddenly needed to go somewhere and didn't wanna pay full price.)
Anyways interesting example of this (regrettably, the only example in my head) is the Continental 757 flight from Cleveland to London Gatwick. It's not an exception at all incidentally...but if you fill all the first class seats on this flight, you'll pay for the entire plan to London *and* back. On the other hand, you need a good 100 passengers in economy class to get same result. Therefore first class is vitally important...and airlines spend huge amounts of money trying to differentiate their first class products. And who flies first class? Business travelers who care about being on-time and the service/amenities they get. Simply, airlines can barely care about their economy class product since they lose money/only break even on the majority of seats anyway.
I'm from Costa Rica, and my mother often flies down there to see the family. One thing that always bugged her was the fact that fares to latin america were terribly high in comparison to fares to europe, and it seems that flying to europe is a much more complex transaction, not to mention it's farther
So having said that, it only makes sense that airlines try to change prices many times per day to eek out just a little bit of profit on the economy class seats. It's the only thing they can do.
I incidentally disagree with your comment that Customers do not want to be in the price shopping business. Customers love to price shop...especially when they are buying their ticket 3 months in advance. There is such a psychological reward in getting a good deal.
milo_Gwalthny wrote:
[a bunch of interesting economic and social points that I have insufficient background to respond to compitently]
For various reasons, both the community of Harlem and the town of Mount Vernon (both New York) have turned down proposals by big-box retailers to open in their neighborhoods, forgoing both the tax benefits and the lower prices that would result. I can't speak for why they did this, but it is one answer to the bizarre mystery of why groceries are more expensive in poor neighborhoods than anywhere else in New York City.
I was born and raised in NYC, and still visit there regularly. I don't find the groceries more expensive in New York's poor neighborhoods than wealthy ones. I do find a few things:
1) Some poorer neighborhoods don't have a big grocery, they just have a greengrocer or bodega, both of which are more expensive than a full supermarket. This is almost certainly because it's harder to get loans for a business in a poor neighborhood.
2) The big name brands are more expensive in supermarkets in poor neighborhoods than wealthy ones
3) The supermarkets in poorer neighborhoods make up for it with a wide variety of "little name" brands: (eg. Badia, D&G), some of this stuff is pretty bad, some of it is good stuff I prefer to the pricier "big names"
4) Some (but not all) of the poorer supermarkets also make up for it with excellent meat and/or produce prices. Apparently there are some good sources out there that are not available to all venues.
So, yes, if you compare the price of a carton of Minute Maid at Food Emporium to the same carton at C-Town, Food Emporium might come out ahead, but I can feed a family well for cheaper at C-Town.
To get back to turning down the big box retailer, I can't speak for Mt Vernon, but some attitudes that I have often heard expressed in Harlem go along the lines of:
A) Big chains homogonize their stock, an independant business is more likely to match the product desires of the community (more little name brands, rather than the big name brands)
B) Big chains take money out of the community. Harlem doesn't see the tax benefits of a Wal-Mart, that goes to the City; the lower prices aren't on what they want. They do, however, see that the guy who owns a store on 125th street, and lives on 133rd street, employs people in the neighborhood and spends most of his profits in the neighborhood, enriches the neighborhood in a real financial sense.
Don't underestimate the power of community in the decision making process, or overestimate the benefit of the homogonized "big-box" retailers.
----
Open mind, insert foot.
Actually ailine prices tend to fall the closer you get to departure time. For example, I once had to fly from Cleveland to L.A. I went up to the counter and was quoted $1800 for a one way ticket. I told the ticket agent that I didn't want to go that bad and started to walk away. Suddenly I was offered the choice to fly standby for $99.
The bottom line is that airline pricing, like most things in the world is simply a matter of supply and demand. The price you pay is determined by how much you want the item and how badly the seller wants to sell.
Okay, a few theoreticals then:
What if none of your friends were willing to put you up for the night?
What if the first night locked out, on the street, you had been picked up for vagrancy and jailed for 30 days?
How would you have continued your classes?
You ARE the exception to the rule, sadly. I am duly impressed - partially by your luck, but much more by your perserverance. And you're right, many people WOULDN'T have tried that hard, and would have just settled for being poor and destitute. But many other people have tried JUST AS HARD as you have, and been knocked back down by further injustices.
It's a lot harder to deal with those injustices when you don't even have a permanent address.
-Hentai [in vita non pacem est]