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Comment by spellboots | Hacker News Reader

Yes, in todays technological society, people who understand technology have advantages. I don't see why that is surprising, given the website you're commenting on.

Ultimately this is not about technology, it's about economics. Surely the restaurant should raise their prices until not enough people want to book 2 months in advance to make bots and make this an issue. Or PAX should raise their prices so they don't sell out in 23 minutes but still sell all their tickets before the show. Or either business should increase their capacity. Or perhaps they are capitalising on the fact that they are oversubscribed as some kind of marketing device. Either way, any time there is a limited supply of something people are going to figure out ways to get some, and if the limited supply is available on the web, people who understand the web will have an advantage.

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"Just raise the price" is an appropriate response to demand for a commodity, but it's an inappropriate response to these scenarios.

For example: PAX is trying to build a community event. The target demographic is not "wealthy people who love games", it's "people who love games" Changing the price results in a different convention.

Similarly, a popular $20 restaurant can't double their prices to keep demand manageable, because a great $20 dinner that costs $40 will reduce the perceived quality of the restaurant.

The result of pricing too low for demand is ticket touting, e.g.: http://www.ebay.com/bhp/pax-tickets

There's this thing here in Copenhagen: http://www.goldentable.com/restaurants-copenhagen/

A number of top restaurants (otherwise booked, on a Saturday night, for 2 weeks) auction off a single table, where 50% of the proceeds go to the restaurant, and the rest to a foundation for gastronomical research.

Another approach is to require a credit card and charge almost the price of a full dinner if you don't show up. The 41 in Barcelona goes one step further and makes you pre-purchase the entire meal.

Some guests will spend another $300 on an expensive bottle of wine. I think it's fine to let some people pay extra in advance to be guaranteed to get a table.

Alinea and Next in Chicago both use a pre-purchase ticket approach. They also open up tickets on a monthly basis a couple weeks in advance, and all the reasonable times are gone basically immediately. And both are far from cheap places.

If PAX or anyone else wants to intentionally price something so that the demand is larger than available supply, then in any case the "effective price" will be raised so that supply matches the demand.

In effect, part of the "effective price" will be the monetary cost, and the other part of the price will be wasted time/emotions/connections/whatever that discrimiminates those who get the ticket from those who don't. This is basic, well researched economics, with plenty of real life examples in various countries, regimes and industries.

The common options include:

a) $x + significant time spent waiting in line - some wait in line and get nothing; some value their time a lot and don't attempt buying.

b) $x goes to the original supplier, $y goes to scalpers/touts/your employee bribes - the stuff gets sold at money market price, but someone else gets the difference;

c) lottery - either intentional lottery, where everybody has a chance of getting a ticket for $x despite that it's market worth is >$x; or an unintentional lottery, where random factors (showing up at the right time, getting a reservation that someone else cancelled) determine if you can or cannot get the ticket. In both cases, the "buyer" might be motivated to resell it if possible, since it's possible that he paid $20, he wouldn't go if it cost $100, but someone else wants to pay $100, so ...

d) (ab)use of advantages - political connections, bots, whatever; you buy at $x and sell at the market price.

In any case, (most) buyers don't get the intended effect of cheaper price; but the seller loses out. Only the middlemen benefit, without adding value. (In one sense, they add back the value that the seller reduced by mispricing)

I've seen what happens in USSR when the majority of economy functions this way - trust me, in most cases raising the price is actually the appropriate response; because otherwise there is so effing large amounts of effort&resources that is wasted - the seller gets $x, but the buyer anyway spends "market price" of $3x to compete with other buyers by giving $x of cash and $2x of wasted, unproductive effort.

It seems to me that the effective price would never fully bring it up to the money market level, and that difference is what makes it worthwhile to choose that strategy?

In the example of (a), there is no middleman, and the set of buyers becomes biased toward those who are dedicated over those with more money, because they intentionally distributed the effective price over multiple...payment channels (? I'm not much of an economist). Edit: actually there is a middleman; I recall the Wii launch, where I knew a guy who waited in line just to sell them on eBay. But still, there are "true fans" waiting who might be priced out at market value.

In the lottery style where tickets go on sale at x time and it's a free-for-all, some significant percentage of this round of sales will go to people that "deserve" them and get to enjoy a reasonable price with negligible non-monetary cost. Yes there will be some money lost to scalpers, but this can be reduced by forcing resellers into an official exchange channel where the original seller gets a cut.

Burning Man is an event where demand has exploded over the past few years and the supply cannot keep up. The organizers are also very concerned about getting the right people the tickets without jacking up the price. They have evolved a somewhat complex multi-pronged approach with lotteries, high-price presales, and a homegrown exchange system (STEP), where I believe they mandate reselling at face value.

edit: On second thought, I have neglected the cost of the people who expend time/effort and miss out completely. But, I still think there are benefits to pricing below market value with a sufficiently robust strategy.

I don't understand why the solution, at least in PAX's case, is not to ban bots. That would open up purchasing to regular human users, and since PAX is a ridiculously popular event, tickets would still sell out.

How do you ban bots with out implementing an arcane, clunky, painful, expensive manual system?

PS: your answer isn't allowed to be captcha.

You don't. I'd much rather suffer through a captcha than have the tickets/reservations sell out in seconds.

Yeah, pretty much this. PAX is a huge, widely popular event. It has an entire community built around it. I suspect that the vast majority of people would not mind filling in a captcha if it means they will have a much better chance of hanging out with friends they made in previous years' PAXs.

Perhaps the reason your answer is not allowed to be "captcha" is that there are numerous services that provide manual captcha answers for bots.

Raising prices is the wrong way to address this behavior. Ultimately the restaurant wants to maximize yield, not just average meal price. Open tables are wasted inventory. So the priority should be to stop bots from grabbing reservations for people who aren't that committed to eating at the restaurant (and thereby stealing them from people who would actually go dine.)

A better solution would be to charge for making a reservation, and give that charge back as a credit against the meal. You don't have to raise prices, you increase the probability that someone making a reservation intends to show up, and when you have a no-show, you get compensated for the empty table (and can still give it to a walk-in.)

Restaurants like State Bird are a bit of a poor example, anyway. Regardless of their reservation book they're going to fill all their tables every night anyway right now, and they don't particularly want larger (5+) parties anyway because they're tiny. I think they want prices low enough that they can establish a loyal clientele that will keep them going once they're no longer the "hot spot" in SF. Or maybe (gasp) they like offering their food to a broader range of customers. Chefs tend to be a little more down-to-earth.

There are some places in D.C. that require a credit card to make a reservation and charge for no-shows and people are FURIOUS about it.

On the flip side, I made my first reservation through opentable a few weeks ago, and I was surprised when they DIDN'T ask for any cc info. Granted I was new to the experience, but the first thing that crossed my mind was I could not show up and it wouldn't be a big deal.

Feel like if they market this move a little better, they could convince their loyal customers that this will allow them a better chance at getting reservations.

Only very popular restaurants require a CC on OpenTable. One of the nice things about OT is that it's very easy to cancel (one click) which I suspect also helps restaurants maximize their yield, since they don't have to keep a table open for a reservation that never shows up. Taking a CC may discourage some people from making a reservation so if you're not already at capacity, it may not be a good play.

Sounds logical that only very popular restaurants would require a CC. Me having to take out my credit card is probably a friction most restaurants want to avoid.

Interesting 20 minute podcast on this topic:

Kid Rock Takes On The Scalpers

http://www.npr.org/blogs/money/2013/06/25/195641030/episode-...

Summary

http://www.npr.org/blogs/money/2013/06/27/196277836/kid-rock...

  1) More shows.
  2) Beat the scalpers at their own game.
  3) Go paperless.
  4) Don't sell the first two rows.

Funny how the rational, clear-headed solution to economic problems always turns out to be "fuck poor people."

Rational perhaps, but not clear-headed. It assumes that people's dining behavior is a relatively linear, simple relationship heavily based on price, in a perfectly efficient market filled with perfectly efficient agents who have perfect information.

This is sort of like estimating the weight of a cow by assuming it's perfect sphere with a radius.

But this isn't entirely surprising. It's a common sentiment on Hacker News, where highly complex markets are reduced to incredibly simple single-variable, Econ-101-stye supply/demand curves. The poster usually then goes on to believe they've solved some major problem and wonders how everyone else can be so blind as to see such a simple solution.

But far be it to leave at just snarkiness. There are a whole slew of reasons why pricing as a lever cannot be used to fine-tune demand. Simply off the top of my head:

- Desirability of restaurants is heavily determined by their pricing context. That hole in the wall Thai place with the IKEA chairs is a great place to get $5 Pad Thai, and is always crowded. If they charged $15 the expectations for service, food, decor, location, etc, would be entirely different. Cannot simply pull the price lever.

- Desirability of restaurants is heavily determined by perceived authenticity. That Chinese restaurant where all the Chinese immigrants eat is popular with everyone because it communicates authenticity. It loses that authenticity if it prices itself out of reach of the people who lend it authenticity. Funnily enough, authenticity is frequently derived from the working-class everyman. Cannot simply pull the price lever.

- Restaurants are divided into price ranges, with not a lot of intermediate prices. This limits the "resolution" to which you can tune your pricing before you jump into the next range (which comes with expectations, authenticity, and other issues as above). There are demand cliffs moving from one range to the next - in other words restaurant pricing is not a continuous function and cannot be modeled as such. It's not even a "sorta kinda linear" curve.

- As price increases demand does not drop off linearly, or close to linearly. If you've got a line out the door for $5 burritos, a $6 burrito may cause only a small dropoff in customers, while a $7 burrito may cause your business to largely dry up. The holy grail of "that price where everyone who wants a burrito can get one without waiting very long" may not be achievable by simply pulling the price lever.

Pricing food is complex. Until the day where all food becomes standardized, commoditized, and we can treat our restaurants like we treat our nuts-and-bolts supplier, it will remain like this.

> Until the day where all food becomes standardized, commoditized, and we can treat our restaurants like we treat our nuts-and-bolts supplier, it will remain like this.

And after this, the minute someone opens a restaurant where food is not standardized, commoditized and that can't be treated like a nuts-and-bolts supplier... a market is (re)born.

It's a common sentiment on Hacker News, where highly complex markets are reduced to incredibly simple single-variable, Econ-101-stye supply/demand curves.

That's a strange phenomenon I've also noticed, since posters here usually have the opposite instinct in any other field. Most systems end up complex and difficult to model by simple rules, unless you restrict your model to a specific range of parameters or behavioral regime. Do you want to know how increasing or decreasing pressure affects fluid flow? Most knowledgeable people would immediately say that it depends: does the pressure change impact the flow regime? If it stays within a flow regime, there is one answer. But if it changes from laminar to turbulent flow or vice-versa, the answer may differ. What initially seemed like a simple relationship has a confounding factor of macro-scale regime-switching.

But in economics, HNers feel somehow confident just giving a blanket answer without analyzing the situation. Price and demand of restaurants are linearly related; raising minimum wages increases unemployment; etc. Blanket statements they'd never make in an unqualified form in fields they actually know about, somehow become fine in a field they haven't studied. Nobody seems to feel the need to inquire, well, is it a simple relationship, or can changes in a parameter change the operating regime? Very strange.

I totally agree with you that it's an enormously complex system, but I wonder how risky a tiny bit of experimentation would be. Maybe it's worth upping everything by 1 dollar just to see? That would make a huge difference to profits. But maybe the hip customer base would notice the change and see it as a signal that their eatery has become bourgeois?

I have to disagree with your point 2: The blue-collar working man doesn't want to queue with a bunch of students for half an hour for his food, however authentic it may be.

In order to determine who wants X the most, you have to ask credible commitments. Getting up at 4AM to make a booking when it becomes available; or waiting in a three-hour queue; or spending time writing a bot is just as significant commitment as paying some extra dollars, so all of those will work to allocate the scarce thing.

But there is a major difference - if you spend three hours in a queue, you lost those hours and noone gained from that. If you spend three hours writing a sniping bot, noone really needs it. But instead if you spend those extra three hours even sweeping streets at minimum wage, and pay that extra money for more expensive tickets - then the seller has gained extra money, which (on scale) increases supply and the world has gained some useful work.

One of the neat things about dollars is that they are convertible into [someone else] getting up at 4AM, [someone else] waiting in a three-hour queue, and [someone else] writing a bot.

That's why you can hire a homeless to do it for you. At Disney World, rich families are actually hiring officially disabled people to get them line skip passes so that they can jump the lines.

In the olden days, you didn't need to be "officially" disabled, you could just have your brother sit in a wheelchair.

...or adapt the site so it's not bot friendly instead of raising prices just to punish people.

Raising prices isn't just punishing people - it also increases supply, since if PAX would gain double revenue then it would incentivize both PAX to obtain larger facilities, and others to make more similar conventions more often so that more of people who want to go can actually do so.

But the result of more people going is a side effect of raising prices; it shouldn't be the main reason. In fact if anything, prices are usually raised to decrease the number of people who pay out for it (ie exclusivity).

The issue here is bots, so the solution should be to make such reservation / booking sites unfriendly to bots. Then the event organisers / restaurants can choose to adjust their prices based on the actual demand and their long term vision instead of trying to play some silly price war with ticket touts.

The issue here isn't bots, the issue is that there are a lot of people who want to go, and they can't decide which ones will stay home (as there isn't enough space for all of them). You need to decide on some kind of system to decide who will get to come.

You can draw randomly, you can determine who you want to come and invite them, or you can determine who want it the most by asking them to pony up a lot of resources - money or waitingtime (live queues) or effort. It's your choice, unless you refuse to decide, and let scalpers/botwriters decide for you and take everyones money for that.

The issue here is exactly bots. The problem is people who have bots are gaining an unfair advantage over those who do not have bots. But raising prices, all you're doing is shifting that unfair advantage from people with IT skills to people with a higher disposable income. Thus you're not solving anything.

Except that PAX is a community event and you don't trash your community by pricing its members out. Not if you're human, anyway.

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