How Online Shopping Makes Suckers of Us All (theatlantic.com)

Thelasko shares an excerpt from a report via The Atlantic, which describes how price discrimination is used in online shopping and how businesses like Amazon try to extract consumer surplus: Will you pay more for those shoes before 7 p.m.? Would the price tag be different if you lived in the suburbs? Standard prices and simple discounts are giving way to far more exotic strategies, designed to extract every last dollar from the consumer. We live in the age of the variable airfare, the surge-priced ride, the pay-what-you-want Radiohead album, and other novel price developments. But what was this? Some weird computer glitch? More like a deliberate glitch, it seems. "It's most likely a strategy to get more data and test the right price," Guru Hariharan explained, after I had sketched the pattern on a whiteboard. The right price -- the one that will extract the most profit from consumers' wallets -- has become the fixation of a large and growing number of quantitative types, many of them economists who have left academia for Silicon Valley. It's also the preoccupation of Boomerang Commerce, a five-year-old start-up founded by Hariharan, an Amazon alum. He says these sorts of price experiments have become a routine part of finding that right price -- and refinding it, because the right price can change by the day or even by the hour. (Amazon says its price changes are not attempts to gather data on customers' spending habits, but rather to give shoppers the lowest price out there.)

Comments

Online ? Authors never shopped in real life

[gurps_npc]

Because I hate to tell you, but stores in Beverly Hills charge more than they do in Compton for the exact same product.

And their are these things called "sales" and "coupons" to differentiate pricing even at the same store.

Yes, online makes it a bit more obvious, and yes, smart people can kill the cookies that are more likely to raise your price than reduce it (they assume no cookie = new customer, so they offer lower prices).

Study should be redone, comparing price differential online with those off-line.

Data Mining works both way

[zifn4b]

If you're reasonably intelligent, you can use the same type of mindset in reverse for your own personal benefit. This is all part of Game Theory. You either learn how to play the game or the game plays you. The option that's not on the table is to end the game or exchange it with a more reasonable game. Such is life.

Re:Oh noes

[ranton]

When you give up your right to check the Internet to find out what their competitors are shopping then I'll agree we should fight their ability to investigate you when setting pricing.