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This is a bad example because the value of the Hermes handbag (to buyers and therefore to Hermes) comes partly from its rarity (a positional good http://en.wiki

This is a bad example because the value of the Hermes handbag (to buyers and therefore to Hermes) comes partly from its rarity (a positional good http://en.wikipedia.org/wiki/Positional_good http://en.wikipedia.org/wiki/Positional_good). A better example would be a Honda car (or Ford, or whoever makes boring cars these days). Say you go to the factory, provide the raw materials and pay the workers to do one extra car which you then drive off in. And suppose otherwise you wouldn't have bothered buying a car at all. Does Honda have something to complain about?

antimagic 13y ago
Yup, it's a bad example for the reason you mention. Putting that aside though, once you're out of positional good territory some providers of goods and services are indeed willing to accept different prices from different customers depending on their capacity to pay. https://en.wikipedia.org/wiki/Market_segmentation https://en.wikipedia.org/wiki/Market_segmentation If I can make 10% profit out of you by charging a lower price whilst still being able to make %200 profit from the next client through the door because they can pay more, then it is rational for me to do so. The trick is that it is difficult to convince rich client A to pay twice as much as poor client B if A knows that B is getting the same good for half the price, but if you can pull that trick off, then it is totally rational to modify the selling price based on the customer's capacity to pay.
- TeMPOraL 13y ago
  It's how airlines work and AFAIK this is why most of the people can fly at all.
pilom 13y ago
Yes! They absolutely have something to complain about! You now have lowered the impression of price of the good to everyone who knows what you did. Now when your friend wants to buy a car, why would they buy one from Ford when they know they can just go down to the factory with the raw materials and a little cash and get the same car for less. Ford should be PISSED!

antimagic 13y ago

Yup, it's a bad example for the reason you mention. Putting that aside though, once you're out of positional good territory some providers of goods and services are indeed willing to accept different prices from different customers depending on their capacity to pay. https://en.wikipedia.org/wiki/Market_segmentation https://en.wikipedia.org/wiki/Market_segmentation If I can make 10% profit out of you by charging a lower price whilst still being able to make %200 profit from the next client through the door because they can pay more, then it is rational for me to do so. The trick is that it is difficult to convince rich client A to pay twice as much as poor client B if A knows that B is getting the same good for half the price, but if you can pull that trick off, then it is totally rational to modify the selling price based on the customer's capacity to pay.

TeMPOraL 13y ago
It's how airlines work and AFAIK this is why most of the people can fly at all.

pilom 13y ago

Yes! They absolutely have something to complain about! You now have lowered the impression of price of the good to everyone who knows what you did. Now when your friend wants to buy a car, why would they buy one from Ford when they know they can just go down to the factory with the raw materials and a little cash and get the same car for less. Ford should be PISSED!