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Dynamic pricing is the future of everything. If consumers are willing to pay 1.5x, you are leaving money on the table by only charging x. In fact in a fully opt
by janalsncm 2y ago
Dynamic pricing is the future of everything. If consumers are willing to pay 1.5x, you are leaving money on the table by only charging x. In fact in a fully optimized system, once consumers have all of their wants and needs met, they will have zero dollars left over. (Expensive end of life care tends to have similar results today.)
NPR did a piece on it last year which to me came off a bit too cheerful.
https://www.npr.org/2024/03/06/1197958433/dynamic-pricing-grocery-supermarkets https://www.npr.org/2024/03/06/1197958433/dynamic-pricing-gr...
Using only time of day is fairly primitive, though. We can do better. With facial recognition, we can probably personalize prices to the penny.
- MichaelZuo 2y agoSince human wants are unlimited, isn’t it by definition that they will have zero dollars left over if they actually tried to satisfy as much as they feasibly could?
- bluGill 2y agoNot really - I want security which is why I always keep a reasonable amount of emergency savings. Not to mention my retirement funds that provide security for the future when I can't work. Ideally I'll die just as I spend my last dollar, but it is highly likely that I will have money left over.
- ChrisMarshallNY 2y agoI have a child that is severely disabled, and will probably never be able to support herself. SSI is a joke, and the incoming Cruelty Administration is likely to make it worse. I’d like to think that I can leave something to her, so she won’t wind up spending the remainder of her life on the streets. I’ve seen that happen, frequently.
- junipertea 2y agoThis bug can be mitigated via inflation.
- bluGill 2y agoThat makes it worse as I have to budget enough money for the worst [best?] case life.
- MichaelZuo 2y agoAren’t you forgoing some other wants? Such that it’s not been satisified to the maximum feasible extent.
- bluGill 2y agoA complete list would be long and get into private things I don't talk about
- darth_avocado 2y ago> if consumers are willing to pay 1.5x, you are leaving money on the table by charging x That’s the same argument for charging thousands of dollars for insulin. It’s also the same argument landlords are using to charge more to victims of the LA fires.
- tmnvix 2y agoIt's essentially predatory behaviour, exploiting those in need. I think anyone arguing in favour of 'pure' market outcomes is essentially arguing in favour of unethical behaviour.
- cma 2y agoIt isn't always exploiting dire needs. It can be a redistributive mechanism like progressive taxes, especially when combined with taxes on the profits.
- unsupp0rted 2y agoEither all selling is predatory or none of it is. I’m in the former camp- it’s predatory and our prosperity is built on it.
- darth_avocado 2y agoSupply demand dynamics only work for optional spending and in market segments that have real competition.
- brookst 2y ago"Either all or none" is a very questionable heuristic for anything. It is possible that price gouging after a natural disaster is predatory, while action pricing for one-of-a-kind memorabilia is not.
- jahewson 2y agoIs the pure market outcome not that someone creates a competing insulin company? Patents and the buying practices of Medicare (both government interventions in the market) would seem to be the two biggest blockers.
- RobRivera 2y agoI dont like the idea that person A and person B will be given 2 different prices for the same commodity. It is discrimination.
- shric 2y agoIn theory this discrimination will be discovered (as in, see article) and if people don't like it they will select for companies that do not have (or have less) such discrimination. If all businesses discriminate then there is an opportunity to compete using no discrimination as an edge. Just as, for example, if a business decided (if it was legal) to only allow people of a certain race to enter, I would like to think that most members of that race would be disgusted enough to boycott that business and the business will rightly fail. Finally, people already effectively pay different amounts for all sorts of things due to varying amounts of tax paid. The private sector can't detect or profit from your tax paid so they use where you live and other signals like whether you're using an iPhone etc. as a proxy for your income/wealth.
- BobaFloutist 2y ago>Just as, for example, if a business decided (if it was legal) to only allow people of a certain race to enter, I would like to think that most members of that race would be disgusted enough to boycott that business and the business will rightly fail. We literally have federal laws outlawing this because it was, in fact, a selling point to exclude other races. Are you unaware of the history, or just hoping that racism has successfully been ended in the United States?
- jahewson 2y ago1964 was 60 years ago.
- BobaFloutist 2y agoSo you think if the law was removed from the books people would simply choose not to have racist public establishments in 2025?
- coldbrewed 2y ago> In fact in a fully optimized system, once consumers have all of their wants and needs met, they will have zero dollars left over. What are your parameters for optimization here? If the point is to maximize extracted revenue then this is a reasonable outcome but we could optimize for any number of targets. We could optimize to make the best use of resources, we could optimize for best consumer reviews, we could optimize for the ideal buyer/seller price that makes both entities in the transaction walk away with the best deal for each of them. But there's this persistent notion in the current business zeitgeist that the only metric worth optimizing is profit maximization and it's one that we should reject. Companies need to make a profit and workers need to take home a salary and that's fine, but we get to build the world that we live in. Living in a world where we care about quality of life and equity in transactions is much more interesting to me than living in one where all we care about is the velocity of extraction from anything that isn't nailed down.
- janalsncm 2y agoI agree with you 100% on the “should”. Companies should behave well. However, they are still profit maximizing machines, so one way to get what we want is to change the system of rewards and punishments such that profits are maximized while we still maintain a livable planet. What I’m suggesting is to punish bad behavior and reward good behavior. Every time a company is hacked, they pay into an annual pool. Every company which isn’t hacked receives money from that pool. CO2 emissions are taxed, which goes into a pool. This pool is used to pay companies that scrub emissions. I’m wondering if these incentives can work to increase life expectancy, decrease child mortality, eradicate diseases, etc. Without better incentives there is no reason not to burn down the planet for a dollar. Of course it is not a panacea, it still requires some social trust.
- surfingdino 2y agoThere's an argument that it is unwise to fleece your customer so hard they don't come back again.
- roboror 2y agoYou can just buy or kill your competition via subsidizing your pricing. There's no appetite to legislate this anticompetitive behavior.
- janalsncm 2y agoIf that were a winning argument there would be a lot less fleecing happening. In reality there may be only one ISP, one airline with flights to where you need to go, two major smartphone OSes, three wireless carriers, one grocery store nearby, etc. Vendor lockin is also a thing. Even if AWS is more expensive, the cost to move elsewhere can be prohibitively high.
- ericmay 2y agoIt’s a winning argument still. Don’t mistake it with lack of competition in a market. Even ISPs have a limit on fleecing customers before people get really fed up with it and nationalize their business or provide funds for competitors. We tend to look at these things through a static lens “two major smartphone OSs” and not over longer periods of time, which is a problem in framing discussion. When Ford built their car there was approximately just one car (one OS). If you paused time there you’d apply the argument you’re making to Ford. But over the longer arc of time you’d have been incorrect.
- gretch 2y ago>If consumers are willing to pay 1.5x, you are leaving money on the table by only charging x. What about other businesses that are willing to charge x-1?
- tshaddox 2y agoIndeed. Price discrimination is a market failure. It's only possible when a seller has market power.
- alistairSH 2y agoThat assumes a perfect market. No information asymmetry between buyers and seller. No collusion. All buyers and sellers on equal ground.
- gretch 2y agoWhat? Really? Please read my comment, you will see that I have not assumed a perfect market. If I sell bagels for $2 each, and then I go down the street and see another bagel shop selling for $1.90 each, I might try to offer mine for $1.80 (if I have margin to spare). It’s really that simple and something that demonstrably happens in the real world every day.
- janalsncm 2y agoIn reality people don’t have infinite time to find the bagel which optimizes value per dollar, they just want a bagel and coffee. Most people wouldn’t walk 2 blocks to save 20 cents even if they knew a bagel of absolutely equal quality could be found there. And bagel shops aren’t that common. The next one might be a 15 minute drive. That’s basically one cent per minute. To bring it back to dynamic pricing, you wouldn’t know what either shop will charge you until you’re there. In fact they could charge the same person different prices at different times.
- gretch 2y agoIn reality, pretty much every study of business ever shows that consumers are price sensitive. And you sound like someone who has never ran a cafe. But by all means, maybe you cracked the code. You should open your store and make a lot of money from these customers who aren't sensitive to price. Don't waste your time theory crafting about it on the internet!
- tshaddox 2y agoI would guess that most dynamic pricing won't work in a competitive market. By "competitive" I mean that there are a large number of buyers and sellers and something close to perfect information (namely that buyers know the prices goods are being sold at).
- anigbrowl 2y agoLikely true, but the point made in the article (near the ned) is that consumers generally don't have that information and vendors go to considerable lengths to obscure it.
- ssalka 2y agoThis is a rather capitalistic and self-centered way to think about pricing. Under our current paradigms, a "fully optimized system" would behave in the way you described, but I would argue that it is optimizing for the wrong things (same as the larger system). To me, a "fully optimized system" would be one that is capable of providing products & services at an equal price to all people. It wouldn't care about who can afford to pay more because it doesn't require the additional profit. Instead, it is efficient at a predictable and stable price point. Those who politically advocate for "equality of opportunity" should favor a future where this is how things work, not one where everyone ends up with $0 spending money. In fact, the latter is exactly the opposite – equality of outcome.
- earnestinger 2y agoAlso, it needs to be framed properly. I propose to name it: value based pricing. How much value does this room provide you? If you can pay 2x, then it implies value you get is also 2x. Third degree price discrimination is not as catchy. https://www.investopedia.com/ask/answers/042415/what-are-different-types-price-discrimination-and-how-are-they-used.asp https://www.investopedia.com/ask/answers/042415/what-are-dif...
- netc 2y agoTaken to the extreme conclusion, governments can potentially charge different tax rates to different individuals based on their inability to sue or inability to fight back. They may completely forego the notion of income based tax brackets . /s
- chrismcb 2y agoI'll disagree with your assessment about having zero dollars left over. Not everyone will want to spend everything they have But also a lot of people are willing to pay 1.5x for something until they find that others aren't. Yes there are somethings I don't mind paying now for, so someone else can pay less. But there are other things that I'll refuse to pay more for if someone is paying less.
- lurking_swe 2y agoor get this…companies can respect their customers! Maybe that would even increase company brand and reputation. The companies that do this will win long term in my opinion. People aren’t stupid.
- mppm 2y agoCapitalism has finally come full circle :) https://en.wikipedia.org/wiki/From_each_according_to_his_ability,_to_each_according_to_his_needs https://en.wikipedia.org/wiki/From_each_according_to_his_abi...