It would be abhorrent to let humans change the prices of goods and services based on the color of your skin, age, gender, religion, etc. However, if a computer does it, that’s apparently just fine.
For age it is common and explicit. Senior discounts for instance, and a bit less explicitly, student discounts. It feels better when it is framed as a discount, but it is equivalent to overcharging those who don't get the discount.
For the other categories, it is usually not explicit, but it definitely happens, especially when haggling is involved.
Price discrimination has been studied and practiced in various firms for decades. Information assymmetry is endemic to virtually any market relation other than haggling over marbles. People feel their economic weakness as unfair. What's really new here, warranting regulation?
The problem is that the value of these information markets creates all the wrong incentives. Companies layer surveillance into everything to subsidize other businesses, and people expect free search and email, and cheap home security even at others' tiny cost.
It's too bad these services live forever as cash cows to subsidize crazy ideas and schemes. They should graduate to public utilities once the product stabilizes.
> It's too bad these services live forever as cash cows to subsidize crazy ideas and schemes. They should graduate to public utilities once the product stabilizes.
In essence if you take capitalism to it's max you will eventually meet Marx.
The article describes Uber's surge pricing as a form of surveillance pricing, but this is misleading. The primary purpose of surge pricing isn't to maximize profit, it's to increase supply. Dynamic pricing in a 2-sided network is different than in retailing.
>The primary purpose of surge pricing isn't to maximize profit, it's to increase supply.
Your thinking is overly rigid here. An action can be multiple things at the same time. Uber's incentive is to maximize transactions per unit time window. You are correct in that surge pricing on a first level pass isn't about profit maximization. You have to go up a layer of a straction or two before that becomes the case. Uber has to increase supply to fulfill transactions for a signalled demand, signalled demand is high, thus signaling more profit to be made, therefore the surge while at first seeming like a negative signal to consumers, is still acting systemically as a mechanism to bring about profit maximization.
Hiding this type of thing from the end consumer, or not saying it out loud, is a favorite of the current batch of business people.
> The primary purpose of surge pricing isn't to maximize profit, it's to increase supply.
Hm. This doesn't pass the sniff test for me.
If say 500 people take an Uber to a venue or need an Uber from the airport, increasing the price more often than not is just going to increase revenue. The price increase doesn't force you into an alternative choice if there are no alternatives.
Many places don't have substantial taxi or similar services, and public transit doesn't meet that same need with people in suburbs / ex-urbs / rural.
the price increase can incentivize more drivers thus increasing supply. conversely driving the price to zero would certain increase demand and eliminate supply.
i mean, if you posit inelastic demand, you dont get you pretend you derived it as a conclusion right?
> the price increase can incentivize more drivers thus increasing supply
But never high enough to meaningfully dilute or really in any way change demand, and by raising the number of drivers, the parent company ultimately still makes more profit.
This seems self reinforcing.
> i mean, if you posit inelastic demand, you dont get you pretend you derived it as a conclusion right?
I'm not pretending anything, I'm considering the reality on the ground when I travel across the US.
Well the same logic can be used to justify bias too. I am surge pricing a person of religion X or race Y because I am increasing the supply for All races / religion in a equitable way!
As usual, "empowering" the FTC to issue fines, or even allowing private suits, is ineffective on its own. The fines need to be required, their levels set by law in a manner proportional to the size of the companies involved, and it needs to be made clear that there is no statute of limitations and that all growth built on ill-gotten gains from past surveillance will (not can) be rolled back when the hammer finally drops. That means, e.g., if you start using surveillance pricing in 2016 and you get caught for it in 2026, everything your company (and its executives and board members) gained in the interim will be rolled back. Current conceptions of punishment for these types of things are simply way too low. The entire tree that has grown from these kinds of activities must be pulled out from the root to adequately deter potential malefactors.
Few years ago, recruiter at a very well known retailer was on phone with me for a Python backend role. I asked him how many people were on my team that I'm going to join.
He told me some 80 developers. Bit surprised and thinking probably recruiter is too noob and quoting me the size of the development team, I asked him again that no, I'm interested in knowing my team size.
He instead corrected me saying that he's not talking about whole engineering team, he's talking about the pricing team that is a sub team inside the data science team and I'll be joining the pricing team that alone has 80 developers.
Modern corporations aren't profitable because of sound business decisions, they're profitable because of corporate welfare + federal subsidies. Not shocked to hear such numbers.
I worked at an insurance company that had very similar numbers. Went as well as you suspect.
>Modern corporations aren't profitable because of sound business decisions
One of the things to think about is the way that lots of average businessmen have always been able to rake in the bucks without resorting to any type of predatory approaches coming anything close to this.
Probably more so in less-modern times, like before MBA's had yet made significant impact. And some of these were much rougher times economically.
The contrast can be so dramatic that there's a major logical conclusion about operators who run their businesses this way now.
"In 2012, Orbitz infamously displayed more expensive hotel offers to Mac users on the assumption that they were less price-sensitive."
I was doing that in the late 90s. Not marking up prices, but displaying higher priced hotels at the top of search returns. It was surprisingly effective when we compared aggregated per night rates between Mac and Windows users (as identified by user-agent).
No need for this kind of attitude here. If you can extract more value out of a customer using more data points, wouldn't you? Or will you simply leave money on the table for someone else to take.
I agree, if you can take advantage of a situation in some way, it's your duty as an American to do it. Why should the race always be to the swift, or the jumble to the quick-witted? Should they be allowed to win merely because of the gifts God gave them? Well I say, cheating is the gift man gives himself.
Based on the title, I assumed this would be about how the consumer could grasp and then counter-utilize the pricing differences these algorithms produce.
For example, understanding that you are being “targeted” by these algorithm for premium extraction and taking measures such as spinning up VPNs, clearing cache/history, etc to save the consumer from overpaying.
Seems like a good market for such a product would exist…
This is really making me consider going back to all cash and local purchases. Maybe prepaid debit cards and a PO box for when I need to order something online.
It's more important now than ever to spend an extra 2 dollars shopping locally. Your neighbors will appreciate it. Bezos will build another rocket and cut more jobs.
Agreed. I shop locally when I can. It's frustrating though that some of that stuff can't be found locally anymore. I went to 3 businesses today looking for a couple cheap car parts. Couldn't find them so ended up getting one part off eBay and then having my friend order the other with his Amazon Prime account.
But yeah, I do spend as much money at local/regional businesses as I can. And I've started donating to local charities to help my neighbors.
Perhaps in some places but if you live in a country without much competition and very high cost of living its much more than an extra 2 dollars to shop locally. Prices are routinely 1.5 - 2x more if you buy locally than online here. Also if money is tight then even if its just an extra 2 dollars then you should make the purchasing decision that benefits you. That extra money is health (both physical and mental (R&R))
You will find many companies don't allow prepaid debit cards. OpenAI months ago refused to accept prepaid debit card but allowed personal debit card. Not sure how they know its a prepaid card though (Visa prepaid). I think many companies are using credit cards as a form of ID.
I don't buy this. Doesn't supply and demand fix this unless of course you are dealing with a monopoly and have no choice. Don't customers find the most affordable goods in the market place and aren't goods priced competitively? What am I missing?
If all the airlines (or whatever business) are doing something like this, how would you know what the prices are and what the alternatives are? Custom prices per user based on willingness to pay shifts market value around a lot.
> If all the airlines (or whatever business) are doing something like this
Then that would be the main issue and far worse then the algorithms, that's a monopoly or cartel and not a free market. Because in a competitive market prices will be competitive with very little arbitrage.
When the algorithm is for estimating consumer surplus, the line between coordination and independent cost-optimization disappears.
Why would you try to one-down on price if an “objective statistical AI algorithm” tells you you’d be leaving money on the table without gaining market share to compensate? All it takes is for the market to be sufficiently concentrated at that point.
I've got news for you there. The Biden administration tried to take the first real antitrust action in decades and then suddenly a bunch of tech oligarchs switched from supporting Democrats to supporting a convicted felon
That won't work. The issue is a fundamental power imbalance being exploited by the seller. An individual will never have the time, money, or energy to be on an equal footing with companies that do this. So giving people a bunch of algorithms and data does nothing. It's just like giving people EULAs and pretending that because they have the stated terms, it somehow makes them an equal party. The solution is to ban situations where these power imbalances exist. Too bad capitalism is inherently based on them....
It would be abhorrent to let humans change the prices of goods and services based on the color of your skin, age, gender, religion, etc. However, if a computer does it, that’s apparently just fine.
For age it is common and explicit. Senior discounts for instance, and a bit less explicitly, student discounts. It feels better when it is framed as a discount, but it is equivalent to overcharging those who don't get the discount.
For the other categories, it is usually not explicit, but it definitely happens, especially when haggling is involved.
Not the same, in fact the exact opposite.
Student and senior discounts are meant as support/benefits/encouragment, to the poorer and weaker.
The commercial version is about the inverse: skinning every group as much as possible.
Anyone can be a student though. Senior discount is definitely legal positive discrimination.
No problem https://i.redd.it/1c3h2y6uzks61.jpg
Price discrimination has been studied and practiced in various firms for decades. Information assymmetry is endemic to virtually any market relation other than haggling over marbles. People feel their economic weakness as unfair. What's really new here, warranting regulation?
The problem is that the value of these information markets creates all the wrong incentives. Companies layer surveillance into everything to subsidize other businesses, and people expect free search and email, and cheap home security even at others' tiny cost.
It's too bad these services live forever as cash cows to subsidize crazy ideas and schemes. They should graduate to public utilities once the product stabilizes.
> It's too bad these services live forever as cash cows to subsidize crazy ideas and schemes. They should graduate to public utilities once the product stabilizes.
In essence if you take capitalism to it's max you will eventually meet Marx.
The article describes Uber's surge pricing as a form of surveillance pricing, but this is misleading. The primary purpose of surge pricing isn't to maximize profit, it's to increase supply. Dynamic pricing in a 2-sided network is different than in retailing.
>The primary purpose of surge pricing isn't to maximize profit, it's to increase supply.
Your thinking is overly rigid here. An action can be multiple things at the same time. Uber's incentive is to maximize transactions per unit time window. You are correct in that surge pricing on a first level pass isn't about profit maximization. You have to go up a layer of a straction or two before that becomes the case. Uber has to increase supply to fulfill transactions for a signalled demand, signalled demand is high, thus signaling more profit to be made, therefore the surge while at first seeming like a negative signal to consumers, is still acting systemically as a mechanism to bring about profit maximization.
Hiding this type of thing from the end consumer, or not saying it out loud, is a favorite of the current batch of business people.
It isn’t just to increase supply, it also reduces demand. It’s a mechanism for finding a new market clearing price… that necessarily maximizes profit
> The primary purpose of surge pricing isn't to maximize profit, it's to increase supply.
Hm. This doesn't pass the sniff test for me.
If say 500 people take an Uber to a venue or need an Uber from the airport, increasing the price more often than not is just going to increase revenue. The price increase doesn't force you into an alternative choice if there are no alternatives.
Many places don't have substantial taxi or similar services, and public transit doesn't meet that same need with people in suburbs / ex-urbs / rural.
the price increase can incentivize more drivers thus increasing supply. conversely driving the price to zero would certain increase demand and eliminate supply.
i mean, if you posit inelastic demand, you dont get you pretend you derived it as a conclusion right?
> the price increase can incentivize more drivers thus increasing supply
But never high enough to meaningfully dilute or really in any way change demand, and by raising the number of drivers, the parent company ultimately still makes more profit.
This seems self reinforcing.
> i mean, if you posit inelastic demand, you dont get you pretend you derived it as a conclusion right?
I'm not pretending anything, I'm considering the reality on the ground when I travel across the US.
> But never high enough to meaningfully dilute or really in any way change demand
literally you restating inelastic demand assumption
> I'm considering the reality on the ground
oh, reality is on your side. whoops i didn't realize i was arguing with reality. so you are definitionally correct?
Also it decrease demand. Someone who is feeling ”eh maybe I’ll take an uber or the train” will be more likely to take the train.
Not an option in much of the US. I'd argue it's mostly a Bay Area and DC corridor thing.
Yea, but Uber is not only in US. US is a minority of the world.
Well the same logic can be used to justify bias too. I am surge pricing a person of religion X or race Y because I am increasing the supply for All races / religion in a equitable way!
Can you explain why they are mutually exclusive?
As usual, "empowering" the FTC to issue fines, or even allowing private suits, is ineffective on its own. The fines need to be required, their levels set by law in a manner proportional to the size of the companies involved, and it needs to be made clear that there is no statute of limitations and that all growth built on ill-gotten gains from past surveillance will (not can) be rolled back when the hammer finally drops. That means, e.g., if you start using surveillance pricing in 2016 and you get caught for it in 2026, everything your company (and its executives and board members) gained in the interim will be rolled back. Current conceptions of punishment for these types of things are simply way too low. The entire tree that has grown from these kinds of activities must be pulled out from the root to adequately deter potential malefactors.
Few years ago, recruiter at a very well known retailer was on phone with me for a Python backend role. I asked him how many people were on my team that I'm going to join.
He told me some 80 developers. Bit surprised and thinking probably recruiter is too noob and quoting me the size of the development team, I asked him again that no, I'm interested in knowing my team size.
He instead corrected me saying that he's not talking about whole engineering team, he's talking about the pricing team that is a sub team inside the data science team and I'll be joining the pricing team that alone has 80 developers.
Modern corporations aren't profitable because of sound business decisions, they're profitable because of corporate welfare + federal subsidies. Not shocked to hear such numbers.
I worked at an insurance company that had very similar numbers. Went as well as you suspect.
>Modern corporations aren't profitable because of sound business decisions
One of the things to think about is the way that lots of average businessmen have always been able to rake in the bucks without resorting to any type of predatory approaches coming anything close to this.
Probably more so in less-modern times, like before MBA's had yet made significant impact. And some of these were much rougher times economically.
The contrast can be so dramatic that there's a major logical conclusion about operators who run their businesses this way now.
They're just plain below-average businessmen.
"In 2012, Orbitz infamously displayed more expensive hotel offers to Mac users on the assumption that they were less price-sensitive."
I was doing that in the late 90s. Not marking up prices, but displaying higher priced hotels at the top of search returns. It was surprisingly effective when we compared aggregated per night rates between Mac and Windows users (as identified by user-agent).
So you're an admitted scumbag? (Primarily Windows user by the way.)
No need for this kind of attitude here. If you can extract more value out of a customer using more data points, wouldn't you? Or will you simply leave money on the table for someone else to take.
I agree, if you can take advantage of a situation in some way, it's your duty as an American to do it. Why should the race always be to the swift, or the jumble to the quick-witted? Should they be allowed to win merely because of the gifts God gave them? Well I say, cheating is the gift man gives himself.
Guy's clearly not an American! (Either of them.)
With the benefit of hindsight. Yeah. Probably...
Based on the title, I assumed this would be about how the consumer could grasp and then counter-utilize the pricing differences these algorithms produce.
For example, understanding that you are being “targeted” by these algorithm for premium extraction and taking measures such as spinning up VPNs, clearing cache/history, etc to save the consumer from overpaying.
Seems like a good market for such a product would exist…
https://m.youtube.com/watch?v=7eIUOUfhoJ8
Some day i might find the time and energy to expand keepassxc to manage fictitious identities and tie them to accounts.
Calling it the "bend you over a barrel" or "fuck you, what's it worth to you?" pricing schemes probably wasn't allowed.
It is a tone shift tho, the new leader of the NDP in Canada is using the term now.
I’m not sure that’ll help at the supermarket
This is really making me consider going back to all cash and local purchases. Maybe prepaid debit cards and a PO box for when I need to order something online.
It's more important now than ever to spend an extra 2 dollars shopping locally. Your neighbors will appreciate it. Bezos will build another rocket and cut more jobs.
Agreed. I shop locally when I can. It's frustrating though that some of that stuff can't be found locally anymore. I went to 3 businesses today looking for a couple cheap car parts. Couldn't find them so ended up getting one part off eBay and then having my friend order the other with his Amazon Prime account.
But yeah, I do spend as much money at local/regional businesses as I can. And I've started donating to local charities to help my neighbors.
Perhaps in some places but if you live in a country without much competition and very high cost of living its much more than an extra 2 dollars to shop locally. Prices are routinely 1.5 - 2x more if you buy locally than online here. Also if money is tight then even if its just an extra 2 dollars then you should make the purchasing decision that benefits you. That extra money is health (both physical and mental (R&R))
Most people don't have an extra 2 dollars.
You will find many companies don't allow prepaid debit cards. OpenAI months ago refused to accept prepaid debit card but allowed personal debit card. Not sure how they know its a prepaid card though (Visa prepaid). I think many companies are using credit cards as a form of ID.
This can't happen in EU. Thanks again.
It is happening in EU.
"Can't"?
why so?
I don't buy this. Doesn't supply and demand fix this unless of course you are dealing with a monopoly and have no choice. Don't customers find the most affordable goods in the market place and aren't goods priced competitively? What am I missing?
If all the airlines (or whatever business) are doing something like this, how would you know what the prices are and what the alternatives are? Custom prices per user based on willingness to pay shifts market value around a lot.
> If all the airlines (or whatever business) are doing something like this
Then that would be the main issue and far worse then the algorithms, that's a monopoly or cartel and not a free market. Because in a competitive market prices will be competitive with very little arbitrage.
When the algorithm is for estimating consumer surplus, the line between coordination and independent cost-optimization disappears.
Why would you try to one-down on price if an “objective statistical AI algorithm” tells you you’d be leaving money on the table without gaining market share to compensate? All it takes is for the market to be sufficiently concentrated at that point.
I've got news for you there. The Biden administration tried to take the first real antitrust action in decades and then suddenly a bunch of tech oligarchs switched from supporting Democrats to supporting a convicted felon
Reality is rarely an ideal monopoly or perfect competition. In practice, there's always a bit of monopoly power.
The solution to such information asymmetry is to mandate disclosure of all algorithms and data used in setting the price.
That won't work. The issue is a fundamental power imbalance being exploited by the seller. An individual will never have the time, money, or energy to be on an equal footing with companies that do this. So giving people a bunch of algorithms and data does nothing. It's just like giving people EULAs and pretending that because they have the stated terms, it somehow makes them an equal party. The solution is to ban situations where these power imbalances exist. Too bad capitalism is inherently based on them....
[flagged]
Dope piece.