Websites Vary Prices, Deals Based on Users' Information

For a simple introduction to the economics of price discrimination from a tech startup's point of view, Joel on Software has a great article [1] which, although it's from 2004, is still quite relevant. That article notes:

"[Charging different people different prices for the same product] pisses the heck off of people. People want to feel they're paying a fair price. They don't want to think they're paying extra...it seems like customers would rather pay $100 when everyone else is paying $100 than pay $79 if they know there's someone out there who got it for $78."

[1] http://www.joelonsoftware.com/articles/CamelsandRubberDuckie...

There was an academic paper on this published in the fall by Telefonica in Spain: http://conferences.sigcomm.org/hotnets/2012/papers/hotnets12...

Abstract:

  Price discrimination, setting the price of a given product
  for each customer individually according to his valuation
  for it, can benefit from extensive information collected
  online on the customers and thus contribute to the
  profitability of e-commerce services. Another way to
  discriminate among customers with different willingness to
  pay is to steer them towards different sets of products
  when they search within a product category (i.e., search
  discrimination). Our main contribution in this paper is to
  empirically demonstrate the existence of signs of both
  price and search discrimination on the Internet, and to
  uncover the information vectors used to facilitate them.
  Supported by our findings, we outline the design of a
  large-scale, distributed watchdog system that allows users
  to detect discriminatory practices.

The paper only has preliminary results (hotnets targets fairly early ideas), but so far has only detected discrimination based on location and search terms.

Once this becomes common place, I wonder if we will see proxy services that runs the same item through 100 different area codes to find the one with the cheapest results.

People will get mad at this but no one will ever reject a personal coupon in the basis that it is unfair for other customers.

I have had customers get annoyed when they find out we are charging more on Amazon (simply passing on the amazon fee). As a customer you will likely find on the amazon marketplace that an seller that also sells from a website will be doing a better price on the website. I guess in this case though the extra price is buying you some protection as the marketplace is very customer friendly.

Here's the thing- if it's based on location, social data, influence, hair color, none of that is illegal. Two things are illegal: 1) discrimination in the -ism sense of the word, and 2) price discrimination based on proximity to competitors in the markets wherein the company doing the price fixing holds a monopoly. #2 is what Staples could be running afoul of here. In the US, it's not illegal to have a monopoly (ie be the only Staples in a small town without an Office Depot/OfficeMax etc). It's also not illegal to engage in anti-competitive (ie under-cutting your competition in price, signing exclusivity contracts etc.) or anti-consumer (ie price discrimination, restriction of choice, etc.) practices. What IS illegal is engaging in anti-competitive practices in situations where you hold a monopoly, and that's what Staples may be in danger of doing here. And yes, I know Staples doesn't hold a monopoly over the entire internet but the value of brand identification / trust and convenience of in-store pickup shouldn't and won't be overlooked by regulators.

Isn't this the ultimate goal, though? To be able to charge people exactly what they're willing to pay, no more, no less? The method they're using (your geographic location) is a little crude, for sure, but surely as retailers are able to build a better profile of their customers this is only going to happen more often.

Why are Swingline staplers perpetual objects of injustice?

How about a simplistic argument against location-based pricing? (Yes, simplistic, but sometimes such an argument serves a purpose.) You're shopping "on the Internet", where there is no physical, "bricks and mortar" retail outlet. [1]

At most, put real differences in shipping costs into the "shipping" portion of the final total. (Something readily auditable.)

Anything else should get a long, hard look.

(I'd consider it akin the "redlining" in the real estate marketplace. Geographically based, but having an outsized impact upon specific demographic/cultural/racial groups.)

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[1] Certainly, in the U.S., retailers have loved to embrace precisely this argument, from the perspective of avoiding state sales taxes.

How was WSJ able to connect from every US zipcode? Through tor? Something similar?