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Dynamic pricing destroys the consumer surplus. The reason why people don’t like it is because the consumer surplus is the only reason why capitalism really prov

by scoofy 3y ago

Dynamic pricing destroys the consumer surplus. The reason why people don’t like it is because the consumer surplus is the only reason why capitalism really provides value to most people. The reason why less-well-off folks are more likely to support a command economy is exactly because they are at the bottom of the demand curve, thus, receive almost no consumer surplus ever… it’s like they have dynamic pricing for almost every item they buy. It big data is allowed to defeat the consumer surplus, don’t be surprised when the political winds quickly move toward price controls.

ryanwaggoner 3y ago
This is a great comment. Taking this further, if big data can eradicate the consumer surplus, then maybe big data could make price controls more feasible. Maybe big data actually could make a command economy kinda work.
- satvikpendem 3y ago
  There is a book called The People's Republic of Walmart about how "command economies" work in corporations, and why we couldn't have something similar in the general economy. I remain unconvinced, however, because the difference is that the amount of data you need is vast and often uncapturable, uncollectable. You basically have to know everything about everything, so markets are a better bottom up emergent simulation of supply and demand, hence why they work so well, at least in the aggregate.
satvikpendem 3y ago
> The reason why less-well-off folks are more likely to support a command economy Yep, but ironically it would destroy even more of their surplus, so, at least for now, they're still benefiting. But also, why shouldn't surplus be destroyed? You don't see people complaining when business surplus is destroyed, and it is because it benefits one party (ours) over the other (theirs), it's simply hypocrisy to think so. For a truly efficient market, surplus on either side should not exist.
- uoaei 3y ago
  > Yep, but ironically it would destroy even more of their surplus, so, at least for now, they're still benefiting. No one who is excluded from affording a service due to dynamic pricing going higher than their budget is "benefiting". I'm having trouble interpreting the boundaries between individuals and groups here in your comment, the language seems to freely and fluidly move between referring to one or the other.
  - satvikpendem 3y ago
    I'm talking about the failures of command or communist economies, mainly.
  - lotsofpulp 3y ago
    There is long term benefit in that it signals to suppliers that more demand exists and leads to more supply. > No one who is excluded from affording a service due to dynamic pricing going higher than their budget is "benefiting". If everyone cannot afford a service, then that means there is limited supply. Any option other than increasing the simply simple favors one party over another for some reason. For example, if price is kept lower than the highest bidder, then it favors whoever was first (which is unfair too). Or you can do a lottery system, which is “fair”, but not necessarily desirable for a society of every limited service is distributed via lottery and hence removing all incentive for competition.
    - uoaei 3y ago
      That happens anyway in a market, you do not need to inject a third party in order to get that signal. What is your angle, why are you so adamant to defend this behavior?
      - lotsofpulp 3y ago
        I had a typo in my previous comment. The first “simply” should be supply”. > than increasing the simply simple favors one party over another for some reason This comment chain is about dynamic pricing, which does not necessarily involve third parties (assuming you mean scalpers). > That happens anyway in a market What happens anyway? Price discovery? Dynamic pricing allows for better price discovery, that is obvious. Whether it is done by sellers or resellers is irrelevant. Obviously, different businesses have different mechanics, so the cost of that price discovery may not be worth the inconvenience. For example, a restaurant might want to eliminate scalpers so they can require IDs, but still increase their price with every 20% of capacity they sell.

by scoofy 3y ago

ryanwaggoner 3y ago

This is a great comment. Taking this further, if big data can eradicate the consumer surplus, then maybe big data could make price controls more feasible. Maybe big data actually could make a command economy kinda work.

satvikpendem 3y ago
There is a book called The People's Republic of Walmart about how "command economies" work in corporations, and why we couldn't have something similar in the general economy. I remain unconvinced, however, because the difference is that the amount of data you need is vast and often uncapturable, uncollectable. You basically have to know everything about everything, so markets are a better bottom up emergent simulation of supply and demand, hence why they work so well, at least in the aggregate.

satvikpendem 3y ago

> The reason why less-well-off folks are more likely to support a command economy Yep, but ironically it would destroy even more of their surplus, so, at least for now, they're still benefiting. But also, why shouldn't surplus be destroyed? You don't see people complaining when business surplus is destroyed, and it is because it benefits one party (ours) over the other (theirs), it's simply hypocrisy to think so. For a truly efficient market, surplus on either side should not exist.

uoaei 3y ago
> Yep, but ironically it would destroy even more of their surplus, so, at least for now, they're still benefiting. No one who is excluded from affording a service due to dynamic pricing going higher than their budget is "benefiting". I'm having trouble interpreting the boundaries between individuals and groups here in your comment, the language seems to freely and fluidly move between referring to one or the other.
- satvikpendem 3y ago
  I'm talking about the failures of command or communist economies, mainly.
- lotsofpulp 3y ago
  There is long term benefit in that it signals to suppliers that more demand exists and leads to more supply. > No one who is excluded from affording a service due to dynamic pricing going higher than their budget is "benefiting". If everyone cannot afford a service, then that means there is limited supply. Any option other than increasing the simply simple favors one party over another for some reason. For example, if price is kept lower than the highest bidder, then it favors whoever was first (which is unfair too). Or you can do a lottery system, which is “fair”, but not necessarily desirable for a society of every limited service is distributed via lottery and hence removing all incentive for competition.
  - uoaei 3y ago
    That happens anyway in a market, you do not need to inject a third party in order to get that signal. What is your angle, why are you so adamant to defend this behavior?
    - lotsofpulp 3y ago
      I had a typo in my previous comment. The first “simply” should be supply”. > than increasing the simply simple favors one party over another for some reason This comment chain is about dynamic pricing, which does not necessarily involve third parties (assuming you mean scalpers). > That happens anyway in a market What happens anyway? Price discovery? Dynamic pricing allows for better price discovery, that is obvious. Whether it is done by sellers or resellers is irrelevant. Obviously, different businesses have different mechanics, so the cost of that price discovery may not be worth the inconvenience. For example, a restaurant might want to eliminate scalpers so they can require IDs, but still increase their price with every 20% of capacity they sell.