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

Airline Pricing..and others

[RaboKrabekian]

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.

Re:Airline Pricing..and others

[callipygian-showsyst]

The idea of pricing products is to charge every consumer the maximum amount they're willing to pay.

This turns the conventional (American) model of retailing on its head! Typically, the POORER you are, the MORE you pay for things.

Think of the services that we offer to poor people:

• Rent-to-own furniture stores
• Check-cashing stores
• Payday loans
• Car loans
• 19% Credit Card interest (on secured cards!)

Conversely, better-off people never pay for anything! For example I can't remember the last time I paid for an airline ticket! My company flys me around a couple of times a month, and that keeps me well-stocked in frequent flyer miles. I get samples of new computers, software, etc, because companies think I'll influence developers and purchasers.

The super-rich get even more freebies. For example, I know a bunch of folks here who got free electric cars from GM because GM wanted people in affluent neighborhoods to see others driving them.

Now, I'm not implying something's wrong here--I think many people are poor because they make bad financial choices (like payday loans!) and not because the "system" is against them. But it's true that the RICHER you are, the LESS you pay for things. If Amazon (or whoever) manages to reverse this by charging more to people who won't notice, it'll turn American marketing on its head!

Re:Airline Pricing..and others

[joedoe]

While you're right about predatory practices that American businesses often engage in, this is a different issue altogether. Those practices mostly hinge on the scarcity of money among the poor, and hence their greater tendency to utilize expensive credit.

Think of the automobile market, which was one of the first examples of someone creating divisions within the market (at GM) to capture more of the money that consumers were willing to spend. The (relatively) poor can buy cheap K-cars, while those with more money settle on better-equipped models, and those with more go for Merecedes, and so on. Without differentiation of products, everyone would have bought a car, sure, but they wouldn't have paid nearly as much for the cars, and the automakers wouldn't have made anywhere near as much money.

In a way, this is an extension of the product-differentiation model, with the idea being that differentiating by individual rather than by class can get them even more of the consumers' money. Inherent in all this, of course, is that they want their tactics to remain (at least relatively) hidden from consumers, fearing the backlash.

I doubt the legality of that, so we're perhaps more likely to see all businesses in a given area settle on similar practices, and then it doesn't matter if they're open about them.

Re:Airline Pricing..and others

[Hentai]

Now, I'm not implying something's wrong here--I think many people are poor because they make bad financial choices (like payday loans!) and not because the "system" is against them.

You think maybe they wouldn't HAVE to make those "choices" if maybe they weren't poor? And maybe they wouldn't BE poor if they didn't have to make those "choices"? Christ, man, can't you recognize a feedback loop when you see one?

I'd say about 50% of poor people are poor because they're stupid, and the other 50% are poor because they're oppressed. I've nearly slid into poverty twice now, and I assure you, the further down the slope you slide, the harder it is to find purchase and keep from sliding further.

I'd also say that about 20% of rich people are rich because they're shrewd, and the other 80% are rich because they're priveleged. I've nearly "made it big" three times now, and I assure you, it's not WHAT you know, it's WHO you know.

"To those that have, much shall be given. To those that have not, even that which they have shall be taken away." Why is one man's fundamental human will "worth" more just because his daddy can fund his entrepeneuralship and get him the right connections to land 50 million dollar deals, while another man - with just as much talent and integrity - is forced to work at McDonalds and get nickeled-and-dimed to death, paying rent on a house he'll never own, taking loans just to feed himself, until one day a computer glitch fucks up his credit rating and his only two choises are starve or steal?

There's gotta be a better way.

Re:Airline Pricing..and others

[workindev]

I'd say about 50% of poor people are poor because they're stupid, and the other 50% are poor because they're oppressed

What the heck does this mean? The poor are no more "oppressed" than the rich are. If a rich guy doesn't pay his bills, you can bet that people are going to go after them just as much as a poor man that doesn't pay.

I'd also say that about 20% of rich people are rich because they're shrewd, and the other 80% are rich because they're priveleged...it's not WHAT you know, it's WHO you know

And I'd say that you are full of crap. If knowledge had absolutely no bearing on your wealth, why is it that a college graduate earns 60% more on average than somebody with a high school diploma? While I don't deny that some people are rich because of a priveleged position that they were in, it is certainly not a limiting factor. Some of the richest people in the world started out without knowing anybody (think of the Sam Waltons and Bill Gates of the world).

while another man - with just as much talent and integrity - is forced to work at McDonalds and get nickeled-and-dimed to death...

I would say this other man is most definately not as talented, otherwise he wouldn't be working for McDonalds. It doesn't take any talent at all to sit around and bemoan the great injustices that have been heaped upon you, while blaming the rich or privileged for all of your problems. A truly talented person would find a way to use his skills constructively, regardless of this position.

There's gotta be a better way.

Well, thats fine and dandy. A typical leftist approach is to find fault with anything they disagree with, but when it comes to actually providing a constructive alternative, they suddenly fall silent.

I'll give you a hint. Currently, there is not a better way than the way we do things. Capitalism is the only system that has shown constant success over the past 200+ years. Note that the alternatives have all been dismal failures.

Use Mozilla...

[ryanvm]

From the ComputerWorld article:

a search for the Planet of the Apes DVD on the Amazon site using a Netscape Web browser turned up a quoted price of $64.99 [...] several seconds later, a similar search performed with Microsoft Corp.'s Internet Explorer browser resulted in a price of $74.99 for the same product

Damn, if that's not a reason to use Mozilla, I don't know what is.

Re:Use Mozilla...

[dissy]

I dont think its so much due to the fact its IE vs Netscape, the reason they pointed this out was because its a totally different browser with different cache/history/cookies/etc so the server had no way to know it wasnt the same person.

P2P pricing system?

[cmburns69]

"The only drawback that concerns me is how each item and price can be connected to an individual."

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... .. Anyway, its just an idea! ..

An online Starcraft RPG? Only at

catalogs

[mgkimsal2]

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...

nowadays = September of 2000?

[patmfitz]

how things are being priced nowadays ... Amazon was already found to be doing this with their prices

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

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.

Hows this for double-talk

[sdjunky]

"We've learned that certain aspects of our site resonate with customers in different ways, and we are continually fine-tuning our site presentation to see how these variables affect customers' purchasing decisions"

Last I checked... If you want to determine if "site changes" cause increase in purchasing etc you leave the price of a product static. This way you can determine if the increase came from better navigation. The price would be your static variable.

I bet that most people who read this ( not those of slashdot but of the world at large ) would fall for this simple and elegant lie.

::sniff sniff::

[Ayandia]

Hey, is that a discrimination lawsuit I smell?

Amazon Exec 1: "This customer buys Precious Moments figurines."
Amazon Exec 2: "They must be some middle-aged soccer mom. Charge them double for new releases, and half price for Disney."
Amazon Exec 1: "What about customers who buy How to Make a Million Dollars a Second?
Amazon Exec 2: "Charge double for everything. They'll be able to afford it eventually..."

pricing discussions

[mgkimsal2]

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.

Re:pricing discussions

[MacJedi]

I'll tell you why they didn't want you to talk about it: asymmetric information benefits the supplier.

Amazons pricing

[Foofoobar]

I was a buyer at Amazon from 95-97 and helped build their buying dept and I can tell you that it is even more insidious than that. They buy straight from publishers/manufacturer when they can on almost all of the most popular items so they can get a 55-60% discount.

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

Re:Amazons pricing

[The Ribena Kid]

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.

This can't be true, they don't mention anything about editting in their patent on discussing an item.

;-)

Doesn't work for educated consumers

[afidel]

With sites like pricewatch.com, pricescan.com, and other competitive shopping sites I know what the market price is for any goods I buy online (generally big ticket electronics items, though I have used similar methods to check large appliances), so how does anyone ever pay much more than the market price for an item that isn't unique to a single online vendor? Do people really make impulse buys online?

Re:Journalism ethics

[evilpenguin]

If he doesn't name the person who said it or the company for whom she works, yes. That's what "off the record" means. It doesn't mean you won't repeat it. It means you won't attribute it to the real source.

What I do with Amazon..

[antis0c]

I've known this for a while now. I have a small network at home, a number of Windows workstation, a few Linux workstations and a number of OpenBSD servers. What I do is look for an item on Amazon I want to buy, then go to that item on every available browser on every computer at home. Through Netscape, Mozilla, IE, Konqueror, Opera, Phoenix and Galeon. Then I complete the purchase from the cheapest one.

It's worked very well for me. Some browsers were as much as 30 dollars more than others for larger priced items. That to me would seem like a grey area in the legal system. You aren't allowed to charge varying prices at regular stores based on the customers appearance. You'd see Walmart getting sued left and right if at the registers they charged 15% more because I was wearing a suit and tie as opposed to looking like white trash. Or charging more for black comedy DVD's if you are black, the ACLU would be all over them in a heartbeat.

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.

Re:Fleecing the poor

[sphealey]

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.

The "higher risk" theory explains a difference in credit costs of up to x%. We can argue what x is: 10, 20, 50? But it does not explain differences in credit costs of 100, 200, up to 10,000%.

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

Re:Fleecing the poor

[addaon]

Buy at mcdonalds and it's two days not hungry. One your fed, one's taken off your life.

Re:Fleecing the poor

[milo_Gwalthny]

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.

Re:Fleecing the poor

[Kunta Kinte]

I wouldn't recommend instituting a 'women-only' hiring policy, unless you feel like running afoul of Equal Opportunity Employment regulations...

...So in other words

If you plan to start a IT consulting firm where the techs give lap-dances while configuring your routers, I think you're in the clear.

Re:Fleecing the poor

[Gleef]

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.

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?

All of this neglects to mention one thing

[Stubtify]

Well the article mentions how technology is helping the businesses, but not the consumer. Yes Amazon keeps track of your past purchases, yes if I search for anything there is a list of "suggestions" on the side. Yes I may not see the same prices as you do, but all of this doesnt matter for one reason.

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.

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?

Discriminatory pricing

[andy@petdance.com]

Am I the only one who has taken basic economics?

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?

this from suck.com, 1998

[tchdab1]

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.

Wal*Mart

[c.derby]

I found this article about Wal*Mart to be an interesting read. It offers insight into the pricing game from the "other end".

I can see the future now....

[TheNumberSix]

If the browser identifies as Safari, boost prices on anything hip or cool by 20% due to Apple-user lust for fashion and style.

If the browser is Lynx, lower prices by 20%, they can't even afford a free-as-in-beer graphical browser!

If the browser is Internet Exploder, blue screen thier PC and charge them a subscription just to access our web site.

Yum, the future of price discrimination!

Actually, this reminds me of a demographics company called Claritas that sells demographics assignment services based on where you live. (Try it for yourself here.)

So now in the future can we expect people to get assigned based on their browsers and OS identification?

Users who run Mozilla on Linux tend to have:

Three or more pets, play video games on a hidden Windows partition they don't talk about and consume Doritos by the truckload.

Too bad Coke pricing isn't weather sensitive

[fname]

For those that read the article, I think it's a shame that Coke's weather sensitive pricing model failed. If it had worked, then often a Coke would cost less (who would want to drink it on a cold day), other times it would cost more. But here's the beneficial part. Now, I bet Coke machines are a lot more likely to go empty on hot days than they are on cold days, because people buy more. Have you ever been in a situation where you would gladly pay $3.00 for a Coke/ bottle of water, if only one were available. Well, with weather sensitive (and inventory sensitive) pricing you could. Once stock gets too low, the price rises, and only the truly thirsty drink. Brilliant!

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).

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.

Except you can't...

[zipwow]

The point the article was making is that they select people at random within a demographic, and give them *different* prices. They call this scientific pricing because they maintain other people as the 'control', then gauge how you, the experimental group react to the new prices.

Since the selection is random I don't see an obvious way to exploit it, with the possible exception of re-loading to see if the price changes. Presumably Amazon has some system for preventing that (like requiring you to log in).

One of the interesting conclusions from many of the retailers interviewed in the article was that discounts should be smaller, but sooner. That sounds good to me, since in general I'm too lazy and impatient to wait around for the 'big sale', and end up paying higher prices. Maybe that same sentiment is why it works?

-Zipwow

Re:Frequent Flyer Miles

[elBart0]

It's very standard practice.

I travel quite a bit as part of my job. No less than 3 weeks every 2 months on the road, usually more. These trips are usually for a business week at a time, and require me to fly on MY time, i.e. Sundays, and sometimes Friday night red-eyes back from the left coast.

The miles are some of the things that make the job worthwhile. I could make just as much money, sitting on my ass writing code. The miles somewhat make up for the fact that I'm away from home for extended periods at a time. Too often people who never travel for work, or maybe take one business trip every two years, look at it as glamerous. It's not. It's work, only, unlike you, I dont get to go home at night. I drive my rental car back to my hotel, eat in the lobby and watch a movie on my notebook.

If I wasn't at least getting the miles for my trips (which pay for my vacations), I wouldn't be travelling.
Simple enough.

PERFECT competition - Re:Rehash

[SpikeSpiff]

I agree. No market is perfectly competitive. Most markets fit somehwere on the continuum between perfection and complete regulation.

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.

Standard argument in favor of price discrimination

[F452]

(This is something I saw recently in a presentation that I thought was interesting.)

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?

slow company, the price is wrong.

[twitter]

Did anyone get the idea that fast company thought that individual price setting was a good idea? That they missed it's illegal is not the only stupid thing about the article. Let's nit-pick:

The neat curves and crisp laws of supply and demand, elasticity, and rational behavior that everyone learns in microeconomics class don't work in the real world.

That's macroeconomics and it does indeed work. That's the whole problem with this aproach. To paraphrase Alan Greenspan, "laws of supply and demand are not to be conned."

Business is at the start of a new era of pricing. This era is being shaped by a new set of insights into business strategy and human behavior, and these insights are turbocharged with software, mathematics, and rapid experimentation. The result is what might be called "scientific pricing." There is even a blossoming industry of a dozen companies that offer scientific-pricing services.

I'll bet there are a whole pile of companies willing to charge you to piss off your customers like that. "Turbocharged" indeed, that means twisted, right? Anyone who believes charging two people different prices for the same thing will make them happy, has a serious lack of insight into human behavior. People talk and feel ripped off.

Changes in pricing will alter every part of the economy. The way that business gets done will change, and companies will flourish or be crushed based in part on their ability to grasp and master the new science of pricing. Among those already using the new techniques are Best Buy, DHL, Ford Motor Co., the Home Depot, JC Penney, Safeway, Saks, Staples, UPS, and Winn-Dixie. General Electric, perhaps taking Jack Welch's warnings to heart, is not only working with at least two different pricing companies -- it has also invested in one.

Send that list to fucked company. All are known for overpricing shoddy merchanise. Soon they will be known for anti-trust violations, save GE which still makes good industial wares and might be smart enough to avoid this new scheme to bilk companies. Winn-Dixie with it's silly little black punishment card is wasting money that could better be spent elsewhere, while my wife now buys groceries at WalMart.

The oldest records of prices ever found are clay tablets with pictographic symbols found in a town known as Uruk, in what was ancient Sumer and what is now southern Iraq. These price records are from 3300 BC -- they've survived 5,300 years. The documents -- records of payment for barley and wheat, for sheep, and for beer -- are really receipts. "Uruk was a large city, at a minimum 40,000 people," says UCLA professor Robert Englund, one of the few experts on the Uruk documents. "So some of the quantities are very high -- hundreds of thousands of pounds of barley, for instance."

OK so far.

But here's the really remarkable thing. The earliest Uruk tablets aren't just the oldest pricing records ever found. They are the oldest examples of human writing yet discovered. In other words, when humans first took stylus to wet clay, the first thing that they were compelled to record was . . . prices.

Bzzzzt - they recorded your generosity to the temple and other administrative stuff. What they show is a deeply rooted human desire for equal treatment and fairness. This is exactly the oposite of using electronic records in a vain atempt to foist higher prices on, "suckers".

Actual loss: 12.7% Re:Fleecing the poor

[SpikeSpiff]

In 2002, Providian, which was thought of as one of the selective sub-prime lenders, had a default rate of 12.7% according to Fortune. They lost over $400 Million on the sub-prime market last year.

That is the opposite of price gouging. The were so aggressively low fee/price that they were nearly bankrupted by a minor economic downturn.

Re:airlines created their own mess by chaning pric

[JimBobJoe]

There is no company or brand loyalty because the customer knows if they dont shop for price they WILL get screwed.

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 :-) . 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.)

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.

Bah!

[Glonoinha]

My fifth semester towards a bachelors degree in software engineering I had to choose between paying rent and paying tuition.

I went homeless for several months, showered in friend's bathrooms when I got a chance and washed my clothes (both pair) in the dorm laundromat. I studied in the dining area of fast food resturants because they had the lights on 24x7, a particularly harsh reminder that I was hungry and didn't have enough money to splurge on fast food. I was working, had a job at the local grocery store as a cashier but that money went towards tuition, books, and food with nothing left over for rent.

That was over a decade ago and I have never regretted it. I look at today's homeless begging on streetcorners and I cry my single tear in memory of that semester, then I drive on.

Everybody has a choice. If I did it, no help from anybody, no handouts, no contacts, a minimum wage job, and no welfare (I was too proud to ask, and thought I was above it. Dumb, probably, but everybody has their pride inspired dumb allowance) then anybody can do it.

You (meaning the metaphysical you, not bagging on you in particular) can do it. I know because I did it. It isn't a question of can you do it, it is a question of are you willing.

Willing to pay that 782% interest on a paycheck loan to get you through the week.
Willing to give up television, cable, all of your worldly belongings and possessions to make it happen.

Basically, willing to pay the price today in order to succeed tomorrow. Those of us that did have no sympathy for those who didn't and won't.

It doesn't take a 4 year degree, but a 4 year degree certainly helps. A BS degree doesn't come cheap however, in what you will need to sacrifice to get it in terms of dollars and hours.

To summarize, I have been poor (homeless for 3-4 months qualifies) and I have been rich. Rich is better.

I was a man with no contacts, no power, and no wardrobe. Nobody GAVE anybody a crippling overdraft and credit card bills, those were a choice (and yes, rent is a choice, as is medical attention, warm food and pretty clothes and a vehicle are all choices...) and I lived on $3.35 an hour, 30 hours a week (that's $400 a month.) Granted that was a while back, but that's real life.

I used my skills constructively and guess what, became a self made man. Maybe I am the exception to the rule, but I sure hope not.

Re:Bah!

[Hentai]

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.