Tuesday, January 22, 2013

Online Price Discrimination

The Wall Street Journal investigate price differences and discovered price discrimination. For example, Staples said "in-store and online prices do vary by geography due to a variety of factors, including rent, labor, distribution and other costs of doing business." Likewise, Capital One Financial Corp. has used personalization to decide which credit cards to display to website visitors. "Dynamic pricing" adjusts prices continuously in response to information including competitors' offerings and other factors.
Capital One says it gathers data about visitors while they are on its website and uses this information to suggest different products to them. "We do not use any of this data in credit decisioning or underwriting," a Capital One spokeswoman said. "We're making an educated guess about what we think consumers will like."


  1. Online price discrimination should come at no shock to anyone. When you think about it from the perspective of the business they are ultimately looking to increase their surplus. One way to do this is to gather as much information about your consumers as possible and offer goods that would be of interest to them. The producer can now possibly bundle more than one good in the hopes that the consumer will purchase both products. By making educated recommendations they are effectively increasing their surplus if such a tactic is successful.

    Price discrimination is a common thing that we should expect. Purchasing tickets for a sporting event well in advance, you would expect a lower cost. As the date of the sporting event gets closer, tickets are almost sold out. You should expect at this point to pay much more than if you would have purchased them in advance. Price discrimination is there everyday but sometime we just choose not to bother ourselves with it.

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  3. Online price discrimination is getting easier as online information gathering improves and is faster. As part of a development team of applications used to watch video online, most every user metric is gathered and stored as we don’t know if we will need it today or tomorrow. Information as to what user behavior is , is easily gathered so our decision engines can do their job of offering up the best price/product for all.
    If brick and mortar retailers have to adjust their prices based on affluence of area, demand of quality for locale, cost of labor, etc., then why would on line retailers not do the same? While their costs of fulfillment are generally the same regardless of geographic area (think Directv who has a national footprint and a fixed national delivery cost of goods vs. your local cable company who has local employees), online retailers need to locally adjust prices so as to remain competitive (or to maximize profits).