Shedding Light On The Hidden Fee Economy
from the why-do-people-put-up-with-it? dept
There's been a lot of griping about the numerous hidden fees that seem to pop up in making purchases these days. The cell phone bill that comes out $20 higher than the advertised rate is a classic example of this. Then there are the hidden fees that are technically avoidable, such as high late fees at Blockbuster, or poor table odds at an otherwise inexpensive Vegas casino. Some economists are trying to study the hidden fee economy, to figure out why misleading pricing hasn't been punished more by the market. One intriguing explanation is that products with avoidable hidden fees actually attract savvy shoppers, like the type that stays at the cheap hotel, but then gambles off-strip, where the odds are better. By adopting this pricing, hotels can attract smart travelers, while at the same time raking the clueless ones over the coals. Still others aren't convinced. Despite the seeming elegance of this pricing system, other economists think that the annoyance factor is too alienating to customers, and that companies would be better off being honest and upfront. Of course, for phone companies, it doesn't hurt that customers don't have any good alternatives.