Are You Being Cheated? However Will You Know? #economics the dismal science #shopping #bigdata

If the price of a can of cold soda from a vending machine varies with the outdoors temperature… are you being cheated in July? Or given a bargain in December? (Or the other way around if you’re down under.) Is a higher price okay when the vendor meets you in the park?

  • If my shopping history says I’m cheap, should I be offered a lower price than you – a person known to splurge?
  • Should the price of pumpkin pie spice go up as Thanksgiving nears?
  • If you got 50% off the list price of $999 for a patio furniture set, would you be angry to find Walmart’s everyday low price sticker on the box – reading $247?
  • Major brick-and-mortar stores like Borders, Blockbuster, Circuit City and Radio Shack are going bankrupt.

Welcome to the world of shopping in the digital age.

Since about the 1860s, a standard asking price replaced haggling in industrialized countries – in part because Quakers and other groups felt charging different prices for the same item was immoral. (In the USA, the 1860s was our Civil War and maybe we were too distracted to haggle – I don’t know what the rest of you were doing.)

But the endless arms race between buyers and sellers takes on a new urgency in the internet age. Is it fair for buyers to view items in a brick and mortar store, then buy cheaper on-line? What do you think of stores that jack up list-prices so sales look better?

Online purchases peak during weekday office hours, so retailers are commonly advised to raise prices in the morning and lower them in the early evening… [Today] Big Data could discern every individual’s own personal demand curve—thereby turning the classroom hypothetical of ‘perfect price discrimination’ (a price that’s calibrated precisely to the maximum that you will pay) into an actual possibility

Perhaps all this confusion will drive people to rent-not-buy everything from a car ride to party supplies.

Personally, I’m retired in a small rural county of New Mexico – definitely not affluent. I’m a few sigmas off the average American.

  • I have the time to spend days researching large purchases.
  • My last pair of jeans cost $5 at a thrift store and that was a splurge for me – I usually wait until donations overwhelm them and they sell as much as you can stuff in a bag for $1.
  • I never go to a mall for entertainment – the closest one is a 2 hour drive! I go for a walk in the forest instead.
  • I notice my neighbors are more likely to set out their own hand-made lawn art than anyone would in suburbia.

I’ve withdrawn from the battle, but what will you do?

Read a fascinating article at theatlantic.com on shopping. Did you know one reason for ending prices in 0.99 was to force cashiers to open the drawer to make change – thereby recording the sale and stopping them from pocketing the money?

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