Hazards of IDs: Price Discrimination

People often focus on the wrong things when worrying about ID cards. For me, one of the right things to worry about is price discrimination. Not necessarily the illegal sorts, like redlining, but the legal sorts, in which firms try to sort buyers by their ability to pay, or their intensity of preference. In economic terms, in some cases its an attempt to shift consumer surplus to producer surplus; in other cases it’s an attempt by a local monopolist to move the apparent supply curve. (I’ve discussed aspects of this problem in a number of articles, the most accessible of which is probably DeLong & Froomkin, Speculative Microeconomics for Tomorrow’s Economy.)

For a real-life example of the kind of price discrimination I mean, see Ed Foster’s Gripelog || Dell Has Three Prices For One Part.

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One Response to Hazards of IDs: Price Discrimination

  1. See also Joel Spolsky on software pricing:

    “[T]his business about segmenting? It pisses the heck off of people. People want to feel they’re paying a fair price. They don’t want to think they’re paying extra just because they’re not clever enough to find the magic coupon code. The airline industry got really, really good at segmenting and ended up charging literally a different price to every single person on the plane. As a result most people felt they weren’t getting the best deal, and they didn’t like the airlines. When a new alternative arose in the form of low cost carriers (Southwest, jetBlue, etc.) customers had no loyalty whatsover to the legacy airlines that had been trying to pick their pockets for all those years…. Somehow, it seems like customers would rather pay $100 when everyone else is paying $100 than pay $79 if they know there’s someone out there who got it for $78. Heck, GM made a whole car company, Saturn, based on the principle that the offered price is fair and you don’t have to bargain.”

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