Ethix Forum – Issue 44

Technology has enabled variable product pricing based on your personal profile. You could be charged more (or less) than your neighbor because your buying habits have been captured by the online retailer. Are there limitations that should be placed on this practice by the sellers? By the law?

Companies should self-regulate their own use of variable pricing, because they ultimately may have to answer to their practices. However, they might want to ask themselves “What would the CEO say about these practices if interviewed by investigative reporters? Would it sound defensible?”
Harry A. Thomas
Seattle, Wash.

Differential pricing is fair. It’s no different than what takes place in the offline world (think auto dealership). But, the commerce sites should be careful of the negative impact when consumers realize that prices vary.
Tom J.
San Francisco, Calif.

On the surface this sounds a bit like the old adage, caveat emptor, the axiom or principle in commerce that the buyer alone is responsible for assessing the quality of a purchase before buying. Back when this was the rule for merchants, they were charging different customers different prices. If any think this is unethical, perhaps they should read the biblical passage in Matthew 20:1-15, where basically the same principle is used, only in this case it is wages paid at varying rates.

How would this technology differ from the Las Vegas casinos that offer free or drastically reduced air and hotel for high-rollers to visit their casino? This is obviously an example of giving preferential treatment based either on their personal profile or a broad-based profile of those inclined toward gambling. On the other side is the regular citizen that only wants to go to Las Vegas on a vacation and enjoy a little gambling on the side. They are faced with paying the full fare for both air travel and hotel.

I used to be in the paint business. A gallon of paint with a retail price of $10 would be sold to an individual painter for $7.50, to a painting contractor for $5 and to building contractor for $2.50. Also, when I moved from Tampa, Florida, to Des Moines, Iowa, I saved hundreds of dollars yearly on auto insurance, based, not on my profile, but on the profile of the city I was living in. Are there any limits placed on these merchants by law or otherwise? I believe these same parameters of profiling and tiered pricing should be available for the online merchants/retailers as well.
Don Andersen
Des Moines, Iowa

Recently, I bought olive oil for $13.50 at a fancy shop. “You have such good taste,” the guy behind the counter said. “I love this oil.” Later, I noticed I had the same oil on my shelf already — from Trader Joe’s for $4 a bottle. I never would have paid $13.50 at Trader Joe’s, but I willingly paid it at the other shop.

OK, so retail stores aren’t the Internet, but is there a difference between targeting on the Internet or elsewhere? It seems today’s buyers have a lot of ways to check out the best price and terms. I think making this particular method or that one illegal would be unenforceable and perhaps even lead us into unintended consequences.
Claudia Luther
Los Angeles, Calif.

Editor’s Note: The Internet giveth, the Internet taketh away. Advanced technology makes it much more technically feasible to implement price discrimination. However, as the airline industry, auto industry, and many others are learning the hard way, the Internet ironically makes price discrimination much more difficult to implement. It is much easier for customers to learn someone else got a better deal than they did, or to find the absolute lowest price before purchasing in the first place.

An interesting example of a company implementing a coupon code to cross-sell a new service occurs through Amazon’s cross-promotion of its new A9 search engine. Go to Google and type in “Amazon discount.” As of this writing, there are several sites mentioning how Amazon gives a discount to people who start at A9, then go to Amazon to make a purchase. Amazon may once again be ahead of the curve: the “discount code” is willfully communicated to a broad set of people and available to everyone, with the expectation that making it available can actually drive sales.

So is this price discrimination? To a certain extent yes, but as one of the responses stated: “caveat emptor” — if a buyer wants the best deal, but they don’t do their homework, they have only themselves to blame, at least in this case.