4 ms·

>hook pricing (aka up front pricing that looks low and turns out high) is only rational. Yes, many deceptive business practices are rational acts on the part o

>hook pricing (aka up front pricing that looks low and turns out high) is only rational. Yes, many deceptive business practices are rational acts on the part of the businesses. That doesn't mean they should be tolerated.

thaumaturgy 3y ago
I have begun to think of this as a "large population error", and I'm noticing it in a lot of different markets. At small scales, annoying your customers is bad business. You only need to lose a few before it begins to hurt. Customer complaints are more likely to be a consideration in business decisions. At larger scales, a business can begin to preferentially adopt practices intended to drive away some customers. Perhaps you don't want the "pathological" customers, to borrow one of Patrick McKenzie's terms. You can make more money with less effort by being more selective about your customers. At extremely large scales, you largely stop thinking about groups of customers altogether. All of your decisions are driven by aggregates -- did all sales go up this quarter, or down? The effort required to do a deep dive into the behaviors and preferences of any individual market segment may not make sense anymore on a quarterly basis. At this scale, you might be able to afford to annoy tens of thousands of customers and still have a very nice graph next quarter. So, when someone says a business practice shouldn't be "tolerated", that's a perfectly reasonable position, except it doesn't actually work for businesses operating at extremely large scales. It's too difficult for customers to organize a protest in a way that will influence that business's decision-making. So much business has moved online in the last 20 years, while the US has leveled off at 80% urbanization over the same time period, along with more and more businesses congealing into BigCos, combined with the recent domination of private equity: lots and lots of things are now operating at a scale where customer concerns just aren't a part of the business model anymore. Coffee shops, fast food, big-box retail, online retail, SaaS, PaaS: all of these can thrive while running on exorbitant pricing and abusive customer policies, because their volume of customers is so large that it's nearly impossible to be so bad that you'll piss off enough customers to impact your decision-making. (Unless you're Sony.)
- staunton 3y ago
  > It's too difficult for customers to organize a protest in a way that will influence that business's decision-making. It's actually very easy (in theory). You (vote for someone who will) ban fraudulent and anti-competitive behavior, sue the offenders and have them pay huge fines. The fact that this very rarely works out is a failure of the political system.
- s1artibartfast 3y ago
  The intuitive answer is competition, where customers move from user-hostile companies to new ones. The problem in my mind is that the largest companies have too much efficiencies of scale to compete with on price. When competition can't undercut on price, it is hard to argue that customers aren't being served by monopoly mega corps.
  - thaumaturgy 3y ago
    Yeah, this is a pretty standard answer to the same market failures that so many people have been talking about recently. It assumes though that low prices are the best possible benefit consumers might get from competition, and it also assumes that megacorps necessarily lead to the lowest possible prices for consumers. Chokepoint Capitalism is a pretty okay book that kicks the legs out from under both assumptions.
    - s1artibartfast 3y ago
      I don't think I'm making any assumptions about what's best. I bring it up because the most common argent levied against mega corps is using monopoly power to drive up prices, which I don't think is always true. If people specifically want to break them up to drive down prices, I don't think that will always be successful.
- thfuran 3y ago
  >So, when someone says a business practice shouldn't be "tolerated", that's a perfectly reasonable position, except it doesn't actually work for businesses operating at extremely large scales. I'm not really sure what you mean. The EU has managed to put together much better consumer protections in a lot of areas. There are large businesses there.
wongarsu 3y ago
Which is exactly why they should be banned to keep the market overall healthy. Preventing deceptive practices in a market economy this is a prime example of useful government "intervention", just like supporting contract enforcement or preventing theft
- AnthonyMouse 3y ago
  They can always justify it as not knowing the price. The sales tax rate is different in different places. It costs a different amount to ship to Florida than Alaska and picking it up at the factory is free (even if nobody does). The advertised price is if you have your own modem, renting one from the cable company is more. None of these are inherently wrong. You should be paying more if you're having it shipped to a remote location with high shipping costs, and the cost of that shouldn't be dumped on every other customer. But it's kind of a loophole if you want the advertised price to be lower than what people are actually going to be paying in practice.
  - wongarsu 3y ago
    There are some cases where not knowing the price is reasonable. As you say, shipping can often only be calculated if you know all items and their destination. If you advertise on national TV you can't name a price that includes sales price (unless the company eats the difference). But these could be treated as tightly regulated necessary evils, not as a justification that showing final prices is always impossible. There is no reason you can't show final price including tax on the label in a physical shop. There is no reason why a restaurant should be able to charge a 20% service charge instead of increasing regular prices by 20%. If you are buying a concert ticket or airline ticket the displayed price should include all mandatory fees. They can upsell you on additional services, but they can't suddenly notice in the last checkout step that your price is higher because the website you are using is charging a fee; that fee was known to them at the beginning of the transaction and should have to be disclosed at that point in time at the latest. If you want to go even further you can also dictate that shipping and handling fees are only allowed to include reasonable costs of actual shipping and handling. All of these are normal common-sense regulations in most first-world countries.
satvikpendem 3y ago
This argument reminds me of pre-ordering games. People are simply too dumb to stop doing so, even if it's in their best interest. But those that do are often rewarded for not pre-ordering in the form of lower prices and more content, hen the game eventually goes on sale. It doesn't mean that pre-ordering should be banned, however.

thaumaturgy 3y ago

I have begun to think of this as a "large population error", and I'm noticing it in a lot of different markets. At small scales, annoying your customers is bad business. You only need to lose a few before it begins to hurt. Customer complaints are more likely to be a consideration in business decisions. At larger scales, a business can begin to preferentially adopt practices intended to drive away some customers. Perhaps you don't want the "pathological" customers, to borrow one of Patrick McKenzie's terms. You can make more money with less effort by being more selective about your customers. At extremely large scales, you largely stop thinking about groups of customers altogether. All of your decisions are driven by aggregates -- did all sales go up this quarter, or down? The effort required to do a deep dive into the behaviors and preferences of any individual market segment may not make sense anymore on a quarterly basis. At this scale, you might be able to afford to annoy tens of thousands of customers and still have a very nice graph next quarter. So, when someone says a business practice shouldn't be "tolerated", that's a perfectly reasonable position, except it doesn't actually work for businesses operating at extremely large scales. It's too difficult for customers to organize a protest in a way that will influence that business's decision-making. So much business has moved online in the last 20 years, while the US has leveled off at 80% urbanization over the same time period, along with more and more businesses congealing into BigCos, combined with the recent domination of private equity: lots and lots of things are now operating at a scale where customer concerns just aren't a part of the business model anymore. Coffee shops, fast food, big-box retail, online retail, SaaS, PaaS: all of these can thrive while running on exorbitant pricing and abusive customer policies, because their volume of customers is so large that it's nearly impossible to be so bad that you'll piss off enough customers to impact your decision-making. (Unless you're Sony.)

staunton 3y ago
> It's too difficult for customers to organize a protest in a way that will influence that business's decision-making. It's actually very easy (in theory). You (vote for someone who will) ban fraudulent and anti-competitive behavior, sue the offenders and have them pay huge fines. The fact that this very rarely works out is a failure of the political system.
s1artibartfast 3y ago
The intuitive answer is competition, where customers move from user-hostile companies to new ones. The problem in my mind is that the largest companies have too much efficiencies of scale to compete with on price. When competition can't undercut on price, it is hard to argue that customers aren't being served by monopoly mega corps.
- thaumaturgy 3y ago
  Yeah, this is a pretty standard answer to the same market failures that so many people have been talking about recently. It assumes though that low prices are the best possible benefit consumers might get from competition, and it also assumes that megacorps necessarily lead to the lowest possible prices for consumers. Chokepoint Capitalism is a pretty okay book that kicks the legs out from under both assumptions.
  - s1artibartfast 3y ago
    I don't think I'm making any assumptions about what's best. I bring it up because the most common argent levied against mega corps is using monopoly power to drive up prices, which I don't think is always true. If people specifically want to break them up to drive down prices, I don't think that will always be successful.
thfuran 3y ago
>So, when someone says a business practice shouldn't be "tolerated", that's a perfectly reasonable position, except it doesn't actually work for businesses operating at extremely large scales. I'm not really sure what you mean. The EU has managed to put together much better consumer protections in a lot of areas. There are large businesses there.

wongarsu 3y ago

Which is exactly why they should be banned to keep the market overall healthy. Preventing deceptive practices in a market economy this is a prime example of useful government "intervention", just like supporting contract enforcement or preventing theft

AnthonyMouse 3y ago
They can always justify it as not knowing the price. The sales tax rate is different in different places. It costs a different amount to ship to Florida than Alaska and picking it up at the factory is free (even if nobody does). The advertised price is if you have your own modem, renting one from the cable company is more. None of these are inherently wrong. You should be paying more if you're having it shipped to a remote location with high shipping costs, and the cost of that shouldn't be dumped on every other customer. But it's kind of a loophole if you want the advertised price to be lower than what people are actually going to be paying in practice.
- wongarsu 3y ago
  There are some cases where not knowing the price is reasonable. As you say, shipping can often only be calculated if you know all items and their destination. If you advertise on national TV you can't name a price that includes sales price (unless the company eats the difference). But these could be treated as tightly regulated necessary evils, not as a justification that showing final prices is always impossible. There is no reason you can't show final price including tax on the label in a physical shop. There is no reason why a restaurant should be able to charge a 20% service charge instead of increasing regular prices by 20%. If you are buying a concert ticket or airline ticket the displayed price should include all mandatory fees. They can upsell you on additional services, but they can't suddenly notice in the last checkout step that your price is higher because the website you are using is charging a fee; that fee was known to them at the beginning of the transaction and should have to be disclosed at that point in time at the latest. If you want to go even further you can also dictate that shipping and handling fees are only allowed to include reasonable costs of actual shipping and handling. All of these are normal common-sense regulations in most first-world countries.

satvikpendem 3y ago

This argument reminds me of pre-ordering games. People are simply too dumb to stop doing so, even if it's in their best interest. But those that do are often rewarded for not pre-ordering in the form of lower prices and more content, hen the game eventually goes on sale. It doesn't mean that pre-ordering should be banned, however.