education

They Charge Different People Different Prices For The Same Good

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If I was in line at Wegmans (local / regional grocery chain) and they charged the woman in front of me $2.99 for a gallon of milk, then looked at me and charged me $3.50, then looked at the person behind me and charged say $3.24, people would be incensed. It certainly seems offensive (and likely illegal) to us that we should be charged varying prices for the exact same good, especially after being “sized-up” by the seller.

But isn’t this what is done as a matter of course in U.S. colleges these days? The University of Rochester for example charges over $55,000 for a year of undergrad tuition, and quickly tempers this by saying most students get some financial aid or money from the endowment.

In effect, doesn’t this allow the school to look at every applicant and essentially charge them different prices after “sizing them up?”

Am I the only one who finds this inconsistent or troublesome? Why are we bothered by one case of price discrimination, and not another?

Further, what should we think of the fact that on a given airline flight, you’d be hard-pressed to find five people who paid the same price for their tickets?

  • Michael E. Marotta

    I think it is great!  This is market.  The problem it presents is to platonists or socratics who expect an Idea to be the standard against which we measure perceived reality.  In other words, you get the “price” by looking at a standard listing from an authoritative agency.  What is Microsoft trading for today? What’s the price of oil?  How much is a gallon of milk?  Our own sensibilities tell mass marketers to be democratic and charge everyone the same price right now – when prices change, they change for everyone.  (Ignore for now those who use coupons and other modes to negotiate their prices.)  Yet, at a convention of the American Numismatic Association or the Michigan State Numismatic Society, where I am known to many dealers as an author, my price is different from someone else’s — and may be higher to me than the price to a real buyer who has a better history of transactions.  (I do not collect much  I buy for research and reporting.)  We numismatists cluck and grumble over cable-TV shows that sell shiny junk for outrageous prices to unknowing buyers… who, nonetheless, are happy with their purchases.  We would rather spend three hours at a coin shop to save $10 and think we got a real steal of a deal.Given that every transaction is at once a buy and a sell for both parties – Royal Dutch Shell buys my dollars with their gasoline – what business is it of yours what we decide between us?

    • http://pretenseofknowledge.com/ speedmaster

       Good stuff, Michael! Thanks for commenting.  :-)