DailyDirt: Pricing Ain't Easy

from the urls-we-dig-up dept

Wed, Jun 27th 2012 5:00pm — Michael Ho

Sometimes the prices of products are mysterious -- or just don't make much sense. Why is gasoline sold per gallon to nine-tenths of a cent? How can rare artwork really be worth millions of dollars? Sometimes, pricing puzzles can stump economists, but more often than not, there's a well-known economic explanation that's just not very intuitive. The invisible hand works in strange ways, and here are a few examples.

JC Penny may be learning a tough economic lesson from its fair and square pricing strategy -- "shrouding" prices is a deeply-ingrained retail practice and consumers have adapted to it. Getting out of the brutal commodity clothing market is a hard, uphill battle... especially if you can't/don't offer customers truly unique products or services. [url]
Orbitz is admitting to sending Mac users to more expensive hotels (maybe not against their will). It's part of a pricing experiment based on data mining consumer behavior online -- Apple computer users tend to pay more for hotels, so why not show them the pricier hotels they're already looking for? [url]
An everyday example of price discrimination can be seen in a vending machine. When the cheap snacks sell out, people may pay more for late night victuals. [url]
The list price of college has been rising incredibly over the last decade, but not everyone pays full price. There's a growing gap between what the average student actually pays for college and what universities say tuition is. [url]

If you'd like to read more awesome and interesting stuff, check out this unrelated (but not entirely random!) Techdirt post.

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Filed Under: college, economics, price discrimination, pricing, shrouding, tuition
Companies: apple, jcpenny, orbitz

4 Comments

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Anonymous Coward, 27 Jun 2012 @ 5:33pm

no more ellen degeneres?
JCP is trying to go upscale and ditch all of its Walmart/Target/bargain-loving customers by making its prices "fair&square". Good luck with that.
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Anonymous Coward, 27 Jun 2012 @ 6:45pm

how about stop with these useless articles, trying to drive clicks to others for some type of revenue
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- Rapnel (profile), 27 Jun 2012 @ 8:06pm
  
  Re:
  Eeko-nom-iks much?
  
  Beek-uz its so hard to move on for you?
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Anonymous Coward, 28 Jun 2012 @ 11:50am

Gasoline Pricing
Way back when, 100yrs ago gasoline was so cheap that pricing it at $0.06 or $0.07 was not deemed appropriate. So the powers that be (gas companies) came up with the 9/10 scheme as a way to encourage everyone to pay more for what they were getting or were getting raped for. Everyone knew it was 6.9 cents but that's less then 7 cents per gallon.
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