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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
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..."
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.
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.
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.
..There's a-dooin's a-transpirin'
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.
"All that is required for evil to triumph is for good men to do nothing." - Edmund Burke
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?
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.
"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?
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?
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.
Never confuse feeling with thinking.
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).
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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".
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.
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.
foldplay your photos won't know what hit them.
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
I don't know which is more depressing, that 2/3 didn't care enough to vote, or that 1/2 of those that did are crazy.
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
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.
Glonoinha the MebiByte Slayer