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Orbitz shows costlier hotel options to Mac users

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Re: Orbitz shows costlier hotel options to Mac users

#121

Post by glesica »

czr80 wrote: post #111
glesica wrote: post #107

Earlier quoted context omitted.

Guy who has taken Econ 101 here. Price discrimination doesn't eliminate dead-weight loss (it really has nothing to do with dead-weight loss), it just converts consumer surplus into producer surplus. https://en.wikipedia.org/wiki/Price_discrimination#Types_of_...

Actually, it does both - capturing consumer surplus for buyers who pay more than the average and eliminating deadweight loss for buyers who pay less than the average. [Technical note: By "average" I really mean the optimal price if the producer is only allowed to set a single price point. But let's not quibble.]

Where did the dead-weight loss come from? It's just consumer and producer surplus. There is no dead-weight loss in this situation as we've been discussing it.

https://en.wikipedia.org/wiki/Economic_surplus

Re: Orbitz shows costlier hotel options to Mac users

#122

Post by chc »

RyanMcGreal wrote: post #109
alister wrote: post #105

Earlier quoted context omitted.

It's not the Right and Wrong interpretation that matters here -- it's the spin. Orbitz is probably run by a bunch of techies, and techies don't understand PR. Orbitz messed up in how they spun their story to the Wall Street Journal. They could have spun their story to say that Mac users have a greater preference for, say, the Westin, Hyatt, and Marriott, whereas Windows user prefer Super 8, Days Inn, Motel 6, and Eco…

> If instead they had promoted their machines as automatically discounting their normal price of $3 down to $2 on cold, non-sunny days, then no one would mind. I have a hard time believing anyone would fall for that spin.

Really? You believe that people fall for Nigerian scams and click on shady ads on the Web, but not that framing a price increase as a discount (a tactic practically every grocery store in the world uses) would make many people feel better about it? I think you're drastically exaggerating the average person's resistance to marketing.

Re: Orbitz shows costlier hotel options to Mac users

#123

Post by mikeash »

RyanMcGreal wrote: post #109
alister wrote: post #105

Earlier quoted context omitted.

It's not the Right and Wrong interpretation that matters here -- it's the spin. Orbitz is probably run by a bunch of techies, and techies don't understand PR. Orbitz messed up in how they spun their story to the Wall Street Journal. They could have spun their story to say that Mac users have a greater preference for, say, the Westin, Hyatt, and Marriott, whereas Windows user prefer Super 8, Days Inn, Motel 6, and Eco…

> If instead they had promoted their machines as automatically discounting their normal price of $3 down to $2 on cold, non-sunny days, then no one would mind. I have a hard time believing anyone would fall for that spin.

Especially since people generally have an idea of what a Coke from a vending machine costs, and $3 ain't it.

Re: Orbitz shows costlier hotel options to Mac users

#124

Post by ajays »

It's not like someone at Orbitz sat down, rubbed his/her hands with glee and said with an evil laugh, "ha! I will rip those Mac users off!"

In all likelihood, someone used the browser type as a feature in their model. It so happens that Mac users are (or were) younger, slightly more financially successful and like to splurge a little (e.g., the Mac itself, when comparable Windows laptops are significantly cheaper). Hence the model learned that it can show more expensive hotels to users with that specific browser type.

Re: Orbitz shows costlier hotel options to Mac users

#125

Post by mikeash »

mratzloff wrote: post #71

It wouldn't surprise me. I've suspected for years that they do differential pricing, but I got confirmation a few days ago. I just bought tickets to Las Vegas on Friday. I got through the checkout process (choosing a flight and a hotel) and then they said there was a "problem" and kicked me back to the beginning of the process. I went through it again, choosing the exact same flights (with the same number of seats av…

I stopped using Travelocity after a repeated problem with this. I was booking a flight which they listed for about $300, and when I got to the end they said, oops, there's been a sudden change, it's now $900.

So of course I bailed out of the process. A little while later, I checked Travelocity again and it was back to $300. Went through to the end again and, same "sudden change", now $900.

As I recall, this persisted for something like a day before I finally gave up and wrote them off as a bunch of scammers.

Re: Orbitz shows costlier hotel options to Mac users

#126

Post by mikeash »

chc wrote: post #122
RyanMcGreal wrote: post #109

Earlier quoted context omitted.

> If instead they had promoted their machines as automatically discounting their normal price of $3 down to $2 on cold, non-sunny days, then no one would mind. I have a hard time believing anyone would fall for that spin.

Really? You believe that people fall for Nigerian scams and click on shady ads on the Web, but not that framing a price increase as a discount (a tactic practically every grocery store in the world uses) would make many people feel better about it? I think you're drastically exaggerating the average person's resistance to marketing.

A very small proportion of the general population falls for Nigerian scams, so I don't think that's a good example.

Re: Orbitz shows costlier hotel options to Mac users

#127

Post by mryan »

RyanMcGreal wrote: post #109
alister wrote: post #105

Earlier quoted context omitted.

It's not the Right and Wrong interpretation that matters here -- it's the spin. Orbitz is probably run by a bunch of techies, and techies don't understand PR. Orbitz messed up in how they spun their story to the Wall Street Journal. They could have spun their story to say that Mac users have a greater preference for, say, the Westin, Hyatt, and Marriott, whereas Windows user prefer Super 8, Days Inn, Motel 6, and Eco…

> If instead they had promoted their machines as automatically discounting their normal price of $3 down to $2 on cold, non-sunny days, then no one would mind. I have a hard time believing anyone would fall for that spin.

In the UK, "fixed penalty notices" (parking tickets) cost e.g. £35 if you pay them within 14 days, or £70 if you pay them later. This is spun as an "early payment discount", but can also be viewed as a "late payment punishment".

A surprising number of people seem to think that they are getting a bargain if they pay early. I appreciate "a surprising number" is not a highly accurate data point :) I am currently reading Cialdini's Influence - some of the research suggests this method of offering the carrot before the stick do work.

Re: Orbitz shows costlier hotel options to Mac users

#128

Post by czr80 »

glesica wrote: post #121
czr80 wrote: post #111

Earlier quoted context omitted.

Actually, it does both - capturing consumer surplus for buyers who pay more than the average and eliminating deadweight loss for buyers who pay less than the average. [Technical note: By "average" I really mean the optimal price if the producer is only allowed to set a single price point. But let's not quibble.]

Where did the dead-weight loss come from? It's just consumer and producer surplus. There is no dead-weight loss in this situation as we've been discussing it. https://en.wikipedia.org/wiki/Economic_surplus

From the trades that don't happen because the producer can't sell to certain segments at a lower price (for fear of reducing his profit on other segments). I suppose it's worth noting that this isn't an issue in perfectly competitive markets (since there price = marginal cost). But, outside econ-101, there aren't really many perfectly competitive markets.

By the way, as I mentioned in my first post, I definitely agree this is about capturing consumer surplus too.

Re: Orbitz shows costlier hotel options to Mac users

#129

Post by AnIrishDuck »

czr80 wrote: post #111
glesica wrote: post #107

Earlier quoted context omitted.

Guy who has taken Econ 101 here. Price discrimination doesn't eliminate dead-weight loss (it really has nothing to do with dead-weight loss), it just converts consumer surplus into producer surplus. https://en.wikipedia.org/wiki/Price_discrimination#Types_of_...

Actually, it does both - capturing consumer surplus for buyers who pay more than the average and eliminating deadweight loss for buyers who pay less than the average. [Technical note: By "average" I really mean the optimal price if the producer is only allowed to set a single price point. But let's not quibble.]

"buyers who pay less than the average" (which I'm assuming means buyers whose reservation price is below the market equilibrium) do not qualify as a deadweight loss. Deadweight loss refers specifically to:

a) buyers who cannot buy something which causes an economic benefit (they gain more than it costs to produce). Examples: shortages, monopoly pricing.

b) buyers who buy something that does not cause a net economic benefit (it costs more to produce than they gain). Examples: gov't subsidies artificially reduce price, negative externalities not factored into price.

See http://en.wikipedia.org/wiki/Deadweight_loss.

Re: Orbitz shows costlier hotel options to Mac users

#130

Post by joezydeco »

vitobcn wrote: post #102
starship wrote: post #95

Earlier quoted context omitted.

Regardless, it never ceases to amaze me how controversial pricing discrimination is. Especially since most people have taken Econ 101: pricing discrimination eliminates dead-weight loss, which should be a good thing right? Nope, instant controversy.

In my opinion this is not about econ 101. It seems obvious why two people getting the exact same product / service but paying a different amount is a controversial matter. Especially, since the discriminating factor is the fact that you are willing to pay more! If a vendor wants to price discriminate, there are ways of doing it, such as loyalty programs or rewards, which do not 'offend' the consumer and still manage…

Let's say Best Buy could magically learn your income and checking account balance when you walked in the door. And just before you walked in, employees rushed and hid all of the lower-priced TVs and computers. How would you feel about that?
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