Friday, August 3, 2007

PO'd at Price Discrimination

So, I am getting ready to head to the annual conference of the Academy of Management today in Philadelphia (yes, I know you wish you could go too, but make sure to check your local news for all of the exciting highlights). I can feel myself already getting irritated. Why? Not because of anything specific to the conference but rather the experience I am sure awaits me at the hotel.

We are staying at a somewhat upscale hotel for location convenience. Amazingly to me, I know the bums are going to want to charge me extra for a wireless internet connection despite the fact that they are already soaking me for the room. Normally this wouldn't bother me - I don't necessarily mind paying for services that I value. But, what kills me is that as I drive to the conference, I will pass bunches of Super 8's and Days Inns all with big signs saying "Free Internet Access." I am paying more to get less.

Somehow, I know this makes sense to the economists. Here is Steven Landsburg's take although he really doesn't address the high-end vs. low-end comparison directly. This is another instance where price discrimination may be backfiring with its irritation to consumers.

How about it, readers? What are other price discrimination tactics that drive you mad?


  1. How about paying $1000 for a table at Vegas night club with 1 or 2 $20 bottles of alcohol?

  2. A friend told me (in case my wife ever reads this blog) that ATM machines in strip clubs charge $5 per withdrawl, and you can withdraw only $50 at a time.

  3. The first place that comes to mind is the airport (pick any airport). I don't know of any other place that would get away with charging $3.50 for a bottle of water (now most airports have few water fountains), $9.00 for a meal at McDonald's, or the newest hassle of having to pay for the electricity to charge your computer and/or cell phone. I am sure that the prices at the Amtrak station are significantly more reasonable.

  4. This is highly irrational on my part, but on at least one occasion I made the decision to buy a book and then changed my mind when I saw that a discount was available for members of the chain's discount club. I don't want to give them my phone number, slow down my checkout, or carry more cards in my wallet, but I don't want to pay more for the book than the next guy either. This seems to relate to your earlier post on no one wanting to be a schmuck (though I'm not sure that I always succeed at that).

    Interesting blog, I hope that you keep it up. I heard about it from Newmark's Door.

  5. My favorite price discrimination tactic is in higher education!!! What other business in the world can force you to itemize how much you can come up with prior to giving you a price. Think if the process for buying a car was similar:

    You walk into the dealer. Every car has a list price of $100,000. The salesman asks you for your last three tax returns, bank statements and to declare any non-liquid investments. After reviewing these, he says he can only give you $10,000 off. Your car is $90K.

    Meanwhile the guy in front of you parked all of his cash off-shore. He gets $90K off and only pays $10K for the same car. What a racket!!

  6. It's pretty clear why high-end hotels charge for internet access while low-end ones don't: business expense accounts. A much higher percentage of a high-end hotel's business comes from business travelers, who can charge incidentals like internet access to a client, expense account, etc. (Brian, can't you charge yours to your research budget?) This isn't true of the typical leisure-oriented traveler staying at the Super 8, which must compete on these "incidentals." Why do the Super 8 and other budget hotels offer free continental breakfast when "luxury" hotels almost never do? It's the exact same thing. I'm amused by the claim that this may be "backfiring" -- I'm absolutely sure this is a revenue maximizing scheme for luxury hotels, even if it upsets you! Nice blog by the way; I'll stop by regularly.

  7. I recently stayed at a name brand hotel/casino in the middle of nowhere Arizona for the convenience to my business destination.

    They did not even offer internet… Go lose some money! We make way more when you’re at the tables than we do when you are checking email.

    Corporate climbers go elsewhere!