January 5, 2008

price discrimination? WHAT? They do that to ME?

Wow! If I had every moment of my wasted life back, I wonder how much time that would add up to. For one, very specific piece of wasted life, I can remember thinking “why do generic brand items have such HORRIBLE packaging?” If I could have the time I spent thinking about just that question and the subsequent moments pondering, to no avail, I wonder if I could have spent more time at the gym or pursuing higher education, or any number of things. But, I didn’t do some undercover economic investigation. Maybe because I’ve been going to grocery stores for about 22 years and I simply locked in the habit, the paradigm, of thinking the same question and coming up with NO answer.

The highlight of these first five chapters for me is in chapter 2. Producers and retailers actually make generic items more unappealing as a form of price discrimination. They sell the name-brand goodies for those who aren’t price-sensitive and they sell the generic goodies for those of us who measure the price per ounce or unit and who realize that the ingredients on the back of the package are the exact same as the name-brand goodies. I always knew that, but to actually provide a disincentive to people whose preferences lead them to buy the more expensive (higher priced) items; they are brilliant in that they also appeal to those people whose preferences lead them to buy bargain. They capture both markets!

In later years (recent years), I noticed that cell phones have all the bells and whistles, and that the better service packages simply don’t have those bells and whistles turned off! “What some people don’t realize is that the professional version is typically designed first, and certain features are disabled for the mass market version.” (Harford, 52) It also explains to me how flying stand-by works; I used to think that I was the only one making out on the deal, but in reality, other parties (perhaps all concerned) are possibly making out better, and if they’re not, then at least I AM. And that is what makes being an undercover economist is all about. Not unexpected, I can approach better economic satisfaction (personal decision efficiency) regarding time vs. wasted time through using my understanding of economics in everyday circumstances.

After writing this out, and then reading the other blogs, I see that quite a few of us have been made better off by reading this book... now I wonder how many producers will be worse off by our becoming privvy to this concept of price-targeting and how effective the discrimination they practice will be after this! Hmmmm.......

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