2 ms·

I had an interesting conversation with an coworker recently - If you give an agent a budget of $500 to buy a flight, and the airline knows this and bumps your

I had an interesting conversation with an coworker recently - If you give an agent a budget of $500 to buy a flight, and the airline knows this and bumps your price to $499 even though it will offer the same flight at $300 to someone else, is there harm done? I argued it feels unjust. He said it's totally fair, it's within budget so what's the problem? Naturally this trends towards a sort of principal-agent problem where the airline is incentivized to bribe your agent for up to $198 to max out your budget (which is a problem if you're not running your own agent). But for general personalized pricing, there is the same dynamic to posture that you have a limited budget so that companies offer you better prices (regardless of whether you really do or not). This is haggling culture at scale. I worry about a world trending towards this sort of thing and away from clearly universal prices and wrote about this at the beginning of the year: https://digitalseams.com/blog/the-behavioral-cost-of-personalized-pricing https://digitalseams.com/blog/the-behavioral-cost-of-persona...)

TheCoelacanth 2mo ago
The problem is that it completely eliminates the consumer surplus from the transaction and converts it to producer surplus. It basically erases all benefits of capitalism for the average person. If it becomes the norm to charge the maximum that someone is willing to pay in every consumer transaction, then business owners are almost forcing average people to try to end capitalism.
therealpygon 2mo ago
I’d ask that coworker, “so you would be okay with paying $10 per gallon of gas, while the Prius that barely uses gas next to you pays only $3 per gallon? You use more gas, which means it is in your budget to afford, right?” (Or pick another alternative that is applicable.) Inverting the argument almost always exposes cracks, because they will immediately switch to why it’s not the same.
halJordan 2mo ago
You've just described the golden age of piracy (itself a principal agent problem, and imo it'll be solved like piracy was). It's also a good example of the "If I break a butcher's windows and cause him to buy a new pane, haven't I done good?" And the answer is no. What you've described is a poor/inefficient allocation of money.

TheCoelacanth 2mo ago

The problem is that it completely eliminates the consumer surplus from the transaction and converts it to producer surplus. It basically erases all benefits of capitalism for the average person. If it becomes the norm to charge the maximum that someone is willing to pay in every consumer transaction, then business owners are almost forcing average people to try to end capitalism.

therealpygon 2mo ago

I’d ask that coworker, “so you would be okay with paying $10 per gallon of gas, while the Prius that barely uses gas next to you pays only $3 per gallon? You use more gas, which means it is in your budget to afford, right?” (Or pick another alternative that is applicable.) Inverting the argument almost always exposes cracks, because they will immediately switch to why it’s not the same.

halJordan 2mo ago

You've just described the golden age of piracy (itself a principal agent problem, and imo it'll be solved like piracy was). It's also a good example of the "If I break a butcher's windows and cause him to buy a new pane, haven't I done good?" And the answer is no. What you've described is a poor/inefficient allocation of money.