by Levi Russell
Writing at Bloomberg View, mathematician and author Cathy O'Neil walks through several ways in which new retail technology could enhance businesses' ability to engage in price discrimination. I recommend reading her piece, as it makes some good arguments in favor of being concerned. However, I think there are reasons to believe price discrimination either 1) is sometimes beneficial or 2) can be easily avoided.
What is price discrimination? It's the practice of charging people different prices for the same good based on their ability or desire to pay. O'Neil mentions that rules are in place that outlaw this practice, except in the cases of coupons, memberships, or bulk orders. But there are other cases. Senior citizen or military discounts are common. These discounts are based on the general idea that significant segments of these populations have relatively low incomes. Yes, there are well-paid soldiers and many, many people over 65 are quite wealthy, but these discounts apply to enlisted soldiers and elderly retirees on fixed incomes.
Coupons, membership deals, bulk discounts, and discounts for military and seniors are generally thought of in a positive light. People who have lower incomes but more time to cut out coupons will pay lower prices. Those willing to give shopping information to retailers get discounts. Some of us pay higher prices so that soldiers and seniors, who might have lower incomes, can still enjoy goods and services at prices they can afford.
Moving to online shopping, O'Neil explains how retailers collect data on their (potential) customers and are able to prey upon the desperate or cavalier by charging higher prices. Here are some examples with potential solutions in italics:
Retailers collect shopping and other data based on your IP address or browser "cookies."
Clear your browser's cache regularly.
Use the Tor browser, which makes it very, very difficult for you to be identified by websites
Retailers collect data based on user's individual profiles.
Many online retailers allow you to purchase without creating an account.
Personal assistants like Google Home or Alexa might pick up on behavioral cues that allow them to charge high prices.
Just don't buy one.
A common theme on this blog is that, as Harold Demsetz pointed out decades ago, comparing the real world with all its faults to a perfect ideal "alternative" isn't necessarily a good guide for policy. So, if advances in retail technology allow retailers to adjust prices based on income or stress or other factors, should something be done to slow these advances? Does it make sense to forego the benefits of improved technology to avoid these potential costs? I don't know the answer to that, but I'm interested in reading your thoughts.