DailyDirt: Pricing Ain't Easy

Economics

from the urls-we-dig-up dept

Sometimes the prices of products are mysterious — or just don’t make much sense. Why is gasoline sold per gallon to nine-tenths of a cent? How can rare artwork really be worth millions of dollars? Sometimes, pricing puzzles can stump economists, but more often than not, there’s a well-known economic explanation that’s just not very intuitive. The invisible hand works in strange ways, and here are a few examples.

• JC Penny may be learning a tough economic lesson from its fair and square pricing strategy — “shrouding” prices is a deeply-ingrained retail practice and consumers have adapted to it. Getting out of the brutal commodity clothing market is a hard, uphill battle… especially if you can’t/don’t offer customers truly unique products or services. [url]
• Orbitz is admitting to sending Mac users to more expensive hotels (maybe not against their will). It’s part of a pricing experiment based on data mining consumer behavior online — Apple computer users tend to pay more for hotels, so why not show them the pricier hotels they’re already looking for? [url]
• An everyday example of price discrimination can be seen in a vending machine. When the cheap snacks sell out, people may pay more for late night victuals. [url]
• The list price of college has been rising incredibly over the last decade, but not everyone pays full price. There’s a growing gap between what the average student actually pays for college and what universities say tuition is. [url]

If you’d like to read more awesome and interesting stuff, check out this unrelated (but not entirely random!) Techdirt post.

Filed Under: college, economics, price discrimination, pricing, shrouding, tuition
Companies: apple, jcpenny, orbitz