Techdirt Podcast Episode 225: Does Dynamic Pricing Deserve The Hate?

from the market-questions dept

“Dynamic pricing” is an idea that sounds efficient and effective in economic theory, but often collapses under the weight of customer anger when put into practice. But while that is true of some of the most egregious approaches, other forms of dynamic pricing are ubiquitous and largely accepted — in part because of how the systems work, and in part because of how they present themselves to customers. This week, we’re joined by Perfect Price CEO Alex Shartsis to discuss the many facets of dynamic pricing, and whether it deserves the hate it gets.

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Comments on “Techdirt Podcast Episode 225: Does Dynamic Pricing Deserve The Hate?”

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crade (profile) says:

I don’t really understand where you are drawing the line for what is and isn’t dynamic pricing.. You seem to conflate regular things like selling different things (like different baseball games) at different prices or the same thing like gas or something having a different price at a different time, with things like charging different people different amounts for buying the same thing at the same time..

If you are going to consider all of the things you talk about dynamic pricing then I don’t think people really have a problem with dynamic pricing and instead will say it depends what you are basing your pricing on whether it’s unfair or not. It’s going to come doing to not just whether the consumers have a choice but also whether they understand their options. If you need to resort to deception in order to "get away" with your pricing plan then yes, you are being unfair.

Anonymous Coward says:

Re: Re:

If you need to resort to deception in order to "get away" with your pricing plan then yes, you are being unfair.

Products didn’t really have "prices" until the 1870s when the price tag was popularized. Before then, people were expected to haggle, but they’d become upset upon hearing someone got a better deal. Many people felt that this unequal treatment was immoral, so marked prices quickly caught on. Coupons brought back some price discrimination; but, in theory, anyone could obtain them with a bit of work, so they didn’t get the strong negative sentiment of haggling or online dynamic pricing.

Anonymous Coward says:

Re: Re: Trolls deserve hate.

15 U.S. Code § 13. Discrimination in price, services, or facilities a.k.a. the Robinson–Patman Act of 1936, a.k.a. the Anti-Price Discrimination Act. "It shall be unlawful for any person engaged in commerce, in the course of such commerce, either directly or indirectly, to discriminate in price between different purchasers of commodities of like grade and quality, where either or any of the purchases involved in such discrimination are in commerce, where such commodities are sold for use, consumption, or resale within the United States or any Territory thereof or the District of Columbia or any insular possession or other place under the jurisdiction of the United States, and where the effect of such discrimination may be substantially to lessen competition or tend to create a monopoly in any line of commerce, or to injure, destroy, or prevent competition with any person who either grants or knowingly receives the benefit of such discrimination, or with customers of either of them"…

Anonymous Coward says:

Re: Re: Trolls deserve hate.

I like how blue basically stated that he thinks rich directors and film producers should now end up paying more than $100 million to make the movies he thinks are exclusively deserving of strict copyright protection – while the people going to watch those movies should pay less since they’re significantly less affluent.

blue isn’t great at thinking things through, but this display has got to be the most "hail of bullets in one’s foot" I’ve seen in a while.

Lawrence D’Oliveiro says:

Needs An Engineering Stability Analysis

There is a common concept in physics and engineering, which I think is called a “dynamical system”. Two examples of these are electronic circuits and car suspension systems. They sound quite different, but there is common underlying mathematics that applies in both situations. (In mathematical terms, these systems are isomorphic.)

In the car suspension system, you have springs, which tend to push back when squeezed, or pull back when stretched, to try to regain their original shape. In electronic circuits, the corresponding analogue is a capacitor, which “pushes back” with a reverse voltage when charged.

Similarly, a car body has inertia, which means once it starts moving in a certain direction and speed, it wants to keep doing so. In electronic circuits, you have the concept of “inductance”, taking the form of coils of wire around an iron core, which tend to keep current flowing once it starts.

And finally, you have mechanical friction in cars, which tends to dissipate energy. In fact, a car suspension has shock absorbers to increase this friction effect even more. In electronic circuits, electrical resistance does the same thing.

Does this isomorphism extend to economic systems as well? I think so. Springiness/capacitance could translate to the idea of price elasticity, where demand goes down as price goes up, and vice versa. But there is inertia/inductance as well, in the common observation that market trends are usually expected to continue in the same direction–a lot of buying of stocks happens as the prices are going up, while a lot of selling happens as the prices are going down. And finally, the equivalent of friction/resistance would be Government regulation, which tries to reduce the responsiveness of the system to both those phenomena.

What is the significance of all this? The fact that a suspension system consisting purely of capacitance and inductance is prone to instability and oscillation. If your car’s shock absorbers are not up to scratch, and you hit a series of bumps at just the right frequency, the resulting feedback could cause serious damage to both your car and its passengers. So the job of the energy-dissipating parts of the system are to provide just the right amount of damping to prevent these oscillations.

Some electronic circuits are carefully designed to oscillate, while others are not. But in an economic market, oscillations correspond to boom-bust cycles, and are generally considered to be undesirable. So the damping provided by Government regulation becomes essential to the proper operation of the market.

frank87 (profile) says:

Re: Re: Re: In engineering all connections are instant.

Physics works with second order differential equations: the acceleration only depends on the current situation (instantly). In economics the current supply depends on the decision to start production (could be years ago).
That time delay causes the well known problem of the random walk. If you try to correct your moves to quicky, your system becomes chaotic. That would be a strong argument against dynamic pricing (It destroys the ability of producers to plan production to match demand).

Lawrence D’Oliveiro says:

Re: Re: Re:2 Physics works with second order differential equations

Maybe you don’t understand that those differentials express rates of change in quantities over time, and have to be integrated over nonzero time intervals to add up to a change in those quantities. Thus, for example, time delays on the order of a microsecond correspond to resonant frequencies in the megahertz range; get the delays down to a nanosecond, and you have gigahertz oscillations.

You may consider economic systems to respond at a slower rate. But high-speed trading introduces sub-second oscillations there, too.

frank87 (profile) says:

Re: Re: Re:3 Physics works with second order differential equations

Yes, I do know differential equations. And I’m not talking about the speed of trading, but the speed of building capacity.
People buy a car for Uber, and really don’t know how much money can be made. When the car is bought, they could be working for gas money only.
(In differential equations the system depends on differentials (speed, acceleration) in this case the driver probably made the decision in the past, when he bought the car)

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