I was wrong about analytic price discrimination

This post from Kate reminds me: I realized over the weekend that I was totally wrong about the evilness of automated price discrimination.

I’d heard the arguments, but for some reason they hadn’t sunk in. Pricing goods based on the buyer’s means isn’t too dissimilar to the Swiss policy of ticketing drivers for amounts that go up with their incomes. In most markets, it seems likely that this will amount to a cross-subsidization from rich purchasers to poor — a progressive transfer. In the past I might have complained about this because the sorting mechanism used to distinguish between the rich and poor was basically to make the poor jump through a ton of hoops: weird store hours, clipping coupons, and otherwise imposing what amounted to a tax on their time (which they were willing to pay because their time was worth less than that of the wealthy). This seemed pointlessly wasteful and inhumane. I think that’s the part that really bugged me.

But of course the stores don’t have any particular desire to make you clip coupons. They just want to be able to effectively price discriminate. I realized that the privacy-dissolving information technology that makes that possible should be viewed primarily as a benefit to the less wealthy: the beneficial price discrimination scheme can continue, but with fewer associated costs to filter out rich people who aspire to freeloading. If those least able to pay can be given a price break without any gross affronts to human dignity, I’m all for it.

Of course, there’s still plenty of room for the unscrupulous to take advantage of the less fortunate, and there remains a tendency to want to give rich people free stuff to promote overall demand. So don’t consider this a blanket endorsement of businesses hunting customers based on inferred wealth.

But the broader loyalty-card behemoth now seems less objectionable to me. I don’t expect to retain much privacy in the face of technology; and to the extent we try to impose restrictions, enforcement against firms seems like the way to go. Let’s pass some relevant legislation, beef up the FTC’s budget and call it a day.

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