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Re car manufacturers using remote "unlock" pricing, I will admit to being horrified when I first heard about it. Unfortunately for my emotions, there is a stro

Re car manufacturers using remote "unlock" pricing, I will admit to being horrified when I first heard about it. Unfortunately for my emotions, there is a strong argument to support this new pricing approach-- which might be BS in specific cases but which, from a macro perspective, may nonetheless have merit-- in that fundamentally, all it is, is a mechanism for further granularity of the age-old thing called price discrimination, which is generally viewed as good for both producers and consumers (not that there cannot be exceptions to either that view, or the circumstances in which that view is valid...)

gyulai 4y ago
> generally viewed as good for both producers and consumers How so? All examples of price discrimination I can think of are basically forms of rent seeking where money is extracted without providing anything in return. Price discrimination is basically a tax levvied by the rich-powerful-and-better-informed entities of the world over the rich-but-powerless-and-poorly-informed. For example, people who gladly pay premia for organic/green/ethical products while accepting any and all claims about the product actually being organic/green/ethical at face value are, to me, rich-but-poorly-informed. Private health insurance in Germany is another good example: The cost of the service they're providing is mostly driven by insanely expensive therapies, like cancer treatment or dialysis, that you may or may not ever need. The catalogue of such services that insurance needs to cover is prescribed by law with only very minor deviations permissible, so you'd expect that premia for different insurance products are in a very narrow range. Not so. One such permissible small deviation is coverage of single-bed rooms during hospital stays versus five-bed rooms. That's financially just small change. But the premia for single-bed often cost as much as twice (or even more) as the entry-level premia. The folk who pay them, to me, are simply poorly informed. They don't work through the math of getting the low premium while paying for the single-bed room out of pocket. A third example: This one is more about situational power than it is about smarts. If there are multiple different modes of transport and railway companies competing to provide transport in a given country, market forces will lead to an equilibrium price for rail transport. This is the price after deduction of the discount you get from the rail card. A tourist however, can't hand in an application for a rail card at the station and wait for 2 weeks for the card to arrive in the mail. So they have to pay full price, without the discount for the railway card. That premium is basically a form of rent seeking, where the rail company extracts a higher price from the tourist, merely because they have the power to do so, and without providing anything of value in return. A plain-and-simple form of rent-seeking. Economically as destructive as can be.
- mattewong 4y ago
  If you think it is not good for producers and consumers, you are not disagreeing with me as much as with economic theory. Personally, I think there are many distortions in practice that can lead to exceptions, but that in the bigger picture of things, it nonetheless holds water. I will not try to recreate the arguments to the theory but here is a basic one to start with from https://www.investopedia.com/terms/p/price_discrimination.asp https://www.investopedia.com/terms/p/price_discrimination.as...: --- Wouldn’t Consumers Be Better Off If Everybody Paid the Same Price? --- In many cases, no. Different customer segments have different characteristics and different price points that they are willing to pay. If everything were priced at say the "average cost," people with lower price points could never afford it. Likewise, those with higher price points could hoard it. This is what is known as market segmentation. Economists have also identified market mechanisms whereby fixing static prices can lead to market inefficiencies from both the supply and demand sides.

gyulai 4y ago

> generally viewed as good for both producers and consumers How so? All examples of price discrimination I can think of are basically forms of rent seeking where money is extracted without providing anything in return. Price discrimination is basically a tax levvied by the rich-powerful-and-better-informed entities of the world over the rich-but-powerless-and-poorly-informed. For example, people who gladly pay premia for organic/green/ethical products while accepting any and all claims about the product actually being organic/green/ethical at face value are, to me, rich-but-poorly-informed. Private health insurance in Germany is another good example: The cost of the service they're providing is mostly driven by insanely expensive therapies, like cancer treatment or dialysis, that you may or may not ever need. The catalogue of such services that insurance needs to cover is prescribed by law with only very minor deviations permissible, so you'd expect that premia for different insurance products are in a very narrow range. Not so. One such permissible small deviation is coverage of single-bed rooms during hospital stays versus five-bed rooms. That's financially just small change. But the premia for single-bed often cost as much as twice (or even more) as the entry-level premia. The folk who pay them, to me, are simply poorly informed. They don't work through the math of getting the low premium while paying for the single-bed room out of pocket. A third example: This one is more about situational power than it is about smarts. If there are multiple different modes of transport and railway companies competing to provide transport in a given country, market forces will lead to an equilibrium price for rail transport. This is the price after deduction of the discount you get from the rail card. A tourist however, can't hand in an application for a rail card at the station and wait for 2 weeks for the card to arrive in the mail. So they have to pay full price, without the discount for the railway card. That premium is basically a form of rent seeking, where the rail company extracts a higher price from the tourist, merely because they have the power to do so, and without providing anything of value in return. A plain-and-simple form of rent-seeking. Economically as destructive as can be.

mattewong 4y ago
If you think it is not good for producers and consumers, you are not disagreeing with me as much as with economic theory. Personally, I think there are many distortions in practice that can lead to exceptions, but that in the bigger picture of things, it nonetheless holds water. I will not try to recreate the arguments to the theory but here is a basic one to start with from https://www.investopedia.com/terms/p/price_discrimination.asp https://www.investopedia.com/terms/p/price_discrimination.as...: --- Wouldn’t Consumers Be Better Off If Everybody Paid the Same Price? --- In many cases, no. Different customer segments have different characteristics and different price points that they are willing to pay. If everything were priced at say the "average cost," people with lower price points could never afford it. Likewise, those with higher price points could hoard it. This is what is known as market segmentation. Economists have also identified market mechanisms whereby fixing static prices can lead to market inefficiencies from both the supply and demand sides.