Price Discrimination is when the same person sees different prices at different times or different people see different prices at the same time. Let me reproduce the five examples of price discrimination that I have given in Ten Ways To Protect Yourselves From Fraud:
- Price of a certain item is 225 (in whichever currency) at one outlet of a chain store in one zip code and 265 at another outlet of the same chain store in the adjacent zip code.
- Price of a certain item is 100 when the order is placed on an ecommerce website. Two days later, before the item is shipped, the price of the same item on the same ecommerce website falls to 80.
- Price of a certain item in a grocery store is 30. Price of the same item in a multiplex is 90.
- Price of the same hotel room jumps up from X to X + Y between the first and second visit to the same Online Travel Agency (OTA) website.
- One borrower gets a mortgage at 10%. Another borrower gets an identical mortage at 11%.
Price Discrimination may or may not be legal in different jurisdictions.
Elizabeth Warren says if Goldman Sachs can't explain its algorithm, it should "pull it down."
Goldman Sachs (like every other issuer):
1) Can explain its algorithm.
2) Isn't going to explain its algorithm because it's not legally bound to do so. https://t.co/o2B5CYK7IO— Ron Shevlin (@rshevlin) November 15, 2019
Challenges to and methods to improve price discrimination will depend on nature of product / service, transaction venue (online v. physical, own real estate v. third pary media), and so on. I can’t think of a single approach that will work everywhere.
Let me take one of the above examples to illustrate how price discrimination can be improved in a specific context.
Price of the same hotel room jumps up from X to X + Y between the first and second visit to the same OTA website.
Now, let’s say somebody reads the article cited in the following tweet:
Don't trust the Internet for flight prices – check out this and many more travel tips in @FortuneMagazine. http://t.co/7pKvSpcvGi
— Ketharaman Swaminathan (@s_ketharaman) April 8, 2014
They might delete their browser cookies before they visit the website the second time so that they see the same old lower price.
This will hinder effort at price discrimination.
The solution is to use sophisticated cookies that can’t be deleted so easily.
Implementing this solution will cost a bit of money, may require legal clearances, and may require changes to privacy policy.
Please take legal counsel before you proceed.