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Comment by jsrozner | Hacker News Reader

It can never be better for consumers. The only way a business would adopt this practice is if it leads to greater revenues. On average, that necessarily means worse prices for the average consumer.

> But if you tell them they can't do this profiling, then they'll presumably resort to some mix of (1) no discounts with slightly lower overall pricing or (2) some loss leaders but otherwise regular pricing.

That's not true. Competition with other market participants should in theory (assuming competition) be sufficient. The firms are in general already charging the profit-maximizing price. They could, however, increase profits with more information.

But there is the additional problem that they will also monetize this information by selling it into advertising markets. The whole point of this business model is to capture previously uncaptured value that would otherwise have been shared in the commons.

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> It can never be better for consumers. The only way a business would adopt this practice is if it leads to greater revenues. On average, that necessarily means worse prices for the average consumer.

That depends on the distribution of consumer incomes. Price discrimination (charging people more who can afford more) can be good for low-income customers.

If you somehow arrange for a redistributive effect. But in practice, the firms are likely to charge each consumer the maximum that consumer can afford. These firms are not engaging in some philanthropic process here.

If you want redistribution, implement a wealth tax.

Are there any examples of markets where price discrimination is good for the average consumer? Airline travel is the one that pops to mind - first class customers pay well above marginal cost and effectively subsidize the cattle class, right?

In the long run it would be strange for this to be the case, no? What are the economic forces that give rise to this? Maybe sometimes recessions affect poorer people more, and first class tickets smooth out revenues?

But in the long run, we've seen a steady worsening of the economy experience as airlines have invested in improved first class experiences. In the long run it's simply impossible for a firm to serve poor people (they have no money), absent interventions that allocate buying power to the poor person, or others that force the firm to do so.

I think the worsening economy class situation is simply consumer choice. Discount carriers offer worse service for a (sometimes minimally) lower price. People pick that, so other airlines do the same (or they would loose customers).

If this was the case and the cattle class would cause airlines to lose money you would definitely see airlines flying smaller planes just for the first class.

Most likely what happens is that cattle class pays for the plane to fly, and airlines make more from first class.

See https://en.wikipedia.org/wiki/Business_class_airline for a small number of examples

Thank you for the link: it proves my point. Most of business-only airlines did not survive, the only two that survived had to add economy class.

Free to play video games?

> the maximum that consumer can afford.

but isn't that less for consumers who can afford less?

> Price discrimination (charging people more who can afford more) can be good for low-income customers.

Unfortunately it doesn't work out that way. Consider banks, for example. As a relatively wealthy person, I don't pay fees for practically anything. On the contrary, banks pay me in the form of new-account signup bonuses, interest-bearing checking accounts, ATM fee reimbursements, etc.

Poorer bank customers, on the other hand, are continuously getting nickeled-and-dimed by banks in the form of monthly account fees, foreign ATM fees, NSF charges, etc.

Likewise, poorer customers are less able to avoid this kind of price discrimination at the grocery store.

If you walk or take the bus to the grocery store, you have fewer grocery stores to shop around for a deal at. If you're living paycheck to paycheck, you're less able to stock up on, say, cold medicine, when you see a good deal (and more likely to pay the "we know you're sick" price). And if you're time-poor (because you're working two jobs, and neither are the kind you can browse the Internet at while your code is compiling), you're less able to do comparison shopping, or notice that the price of what you need is always more expensive than when you don't.

Yeah, but you're probably 'paying' them in the form of cash deposits that earn nothing, but which they lend out for a few percent.

Yes, you’ve described the business model of banks. Have a lollipop. :-)

(Mine pays me about 3% APR which isn’t nothing.)

>It can never be better for consumers. The only way a business would adopt this practice is if it leads to greater revenues. On average, that necessarily means worse prices for the average consumer.

Not necessarily. Look at airlines for example, which make heavy use of price discrimination. This allows them to offer a lower economy price to people who have less money, while subsidizing the flight by charging a higher price to business or luxury travelers.

If they were only allowed to offer one type of ticket at one price, it would mostly benefit richer passengers while pricing the poorest passengers out of air travel.

Nobody is saying you can’t have different classes of service or product offerings. But if I’m buying a banana or you’re buying it, it’s the still a banana.

Different air travelers can pay very different prices for the same seat.

Airlines can't directly tell how much money a customer has, so they find indirect proxies.

Business travelers (reimbursed by their employer and thus not very price-sensitive) have identifiable patterns. They prefer particular flights on particular days of the week, tend to buy tickets close to date of travel, etc. Airlines exploit this to charge them higher prices.

If two consumers purchase the same item at the same time, it should be the same price. That's what we're debating. If an airline raises prices closer to departure, then that's not a violation of privacy, nor discriminatory in the sense we're discussing here.

I do, however, object to firms aggregating any individual's purchases across different interactions. That data should belong solely to the individual and it should be illegal to retain enough information to aggregate interactions across interactions with the same customer.

Stores already have that in the form of having cheaper and more expensive products in the same category (for example, 5 different brands of tomato sauce).

The practice that needs to be outlawed is invisible and per customer pricing. It would be the airline for the same class of seat charging different amounts because, for example, their profile of the flier shows they recently searched for "casket" and so they are likely heading to a family funeral.

It would be as if the airline for their economy class offered the flight for $1000 if you don't play, $600 to attract customers into buying, and $800 if they find their customer is desperate. All for the same seat.

They already do charge different prices for the same seat, based on their assessment of the type of passenger you are.

You've picked an "evil" example, but what price discrimination really tends to look like is charging richer people more.

Prices are generally lowered for poor people because they'd rather have your $300 than have an empty seat. If you don't have $800, no amount of desperation will make you pay it - you'll just miss the funeral.

The counter example are “dollar stores”, that offer lower per-package pricing at much higher per-unit prices.

> [Airlines] already do charge different prices for the same seat, based on their assessment of the type of passenger you are.

That has been often accused, but not proved (at least in the US).

> If they were only allowed to offer one type of ticket at one price, it would mostly benefit richer passengers while pricing the poorest passengers out of air travel.

I'm sold, how do we put this in the Constitution?

There's no subsidizing in your described arrangement unless people who have less money get it below cost.

In the end this made news about how the surveillance economy works and should further freak people out about it. This helps long term I think.

I have a club card account with a fake name on it. While they may track the purchase I make and know that a single person made them all, it's not attached to anything that is linked to me. My understanding is that they can't link credit card numbers to purchases, they can only use the number to run the transaction.

It's not great they track purchasing, but if it's not linked to me I don't really care that much.

Unfortunately AI will get better and better at circumventing your security by obfuscation. The best use of AI is surveillance.

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