Discrimination – good?

Is price discrimination a good thing or a bad thing is a topic that deserves a much more open and intelligent discussion than it typically gets. There are plenty of shades of gray in this one. It goes to the heart of the puzzle about economics v.s. the rest of the social sciences. The amateur economist assumes that the world is at it’s most beautiful when the cost of goods hew closely to the cost of production. But the world? It don’t work that way. The MBA strives to scrap the maximum price out from under the pricing curve. Taking home all, if not more, of the value the user gets from using the product. The gap between these two world models is huge. The ethical issues are tough.

Most conversation about this tends toward the absolute, which is useless if pure. Martin Geddes takes a swipe at trying to point that out, but his earlier posting about the market structure of telecom in the Caribbean islands is a more interesting entry point if you want to talk about reality.

This puzzle is deeply entangled with the identity privacy problem, because pricing is about knowing your customer. Which is why the rest of the social sciences need to be at the party. You can’t create islands of trust if trust is just another name for pricing games.

0 thoughts on “Discrimination – good?

  1. Mark

    Also have a look at this great paper on the topic of price
    discrimination by Andrew Odlyzko of the Univ. of Minnesota who
    has been studying this issue for a number of years:

    “The Evolution of Price Discrimination in Transportation and its Implications for the Internet”
    http://www.rnejournal.com/articles/odlyzko_RNE_sept_2004.pdf

    See also his articles:
    “Why electronic publishing means people will pay different prices”
    http://www.nature.com/nature/focus/accessdebate/7.html

    “Privacy, economics, and price discrimination on the Internet”
    http://www.dtc.umn.edu/~odlyzko/doc/privacy.economics.pdf

  2. Ben Hyde

    I’m a huge fan of Odlyzko’s work, it’s all facinating. The problem needs a broader audience and a deeper discussion. It’s not simple.

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