Orbitz shows costlier hotel options to Mac users • Hacker News Board

Re: Orbitz shows costlier hotel options to Mac users

#141

Post by czr80 » Tue, Jun 26, 2012, 7:21 PM UTC

AnIrishDuck wrote: post #140

czr80 wrote: post #138

Earlier quoted context omitted.

Okay, let's take the monopoly example from wikipedia. Firm prices at monopoly price (60 cents), deadweight loss because all transactions for buyers with marginal benefit between 10 and 60 cents do not occur. Assume some identifiable group of people exists with marginal benefit deadweight loss is smaller. Therefore, price discrimination can reduce deadweight losses.

Close, but your example is missing a crucial piece. Specifically, the marginal cost of producing the product. Let's say the MC is 20 cents at the scale produced (Q1). The second group (students) get a MB of let's say 30 cents. They will not buy at a price of 60 cents, therefore there is a deadweight loss (MC < MB to students, but they do not have the good). If the monopolist can expand their output to Q1 + Q2 (where…

Umm... so you agree? Price discrimination can reduce DWL?

By the way, there's no need to assume MC is a function of Q since that just complicates the example for no benefit (in the wiki article notice that MC is just a constant 10 cents). And yes, though I didn't stress it, of course the discount price must still be greater than the MC (and so in the range of 10 - 60 cents).

Re: Orbitz shows costlier hotel options to Mac users

#142

Post by Nutella2 » Tue, Jun 26, 2012, 7:49 PM UTC

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…

Amazon does this. If you look at a product and then come back later to buy it the price will be higher than it is if you bought it immediately after looking. If you want to get the best prices and look up things whenever you want, use one computer to do lookups and one to buy.

Re: Orbitz shows costlier hotel options to Mac users

#143

Post by starship » Tue, Jun 26, 2012, 10:10 PM UTC

glesica wrote: post #107

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.

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_...

Did you read the article you just linked to? Here's a direct quote "From a social welfare perspective though, first degree [perfect] price discrimination is not necessarily undesirable. That is, the market is entirely efficient and there is no deadweight loss to society."

Without price discrimination, unless you're operating tax-free and subsidy-free there is always a dead-weight loss. Perfect price discrimination eliminates it. It is literally right there in the article you just linked to.

Re: Orbitz shows costlier hotel options to Mac users

#144

Post by starship » Tue, Jun 26, 2012, 10:34 PM UTC

starship wrote: post #95

suprgeek wrote: post #90

It is important to read the article carefully: WRONG - Mac users see higher prices for same hotels than Windows users RIGHT - Mac users are sometimes also shown hotels that are costlier than their windows users "...so the online travel agency is starting to show them different, and sometimes costlier, travel options than Windows visitors see."

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.

Let me clarify my point. Our economy is based on the notion that things are worth what people are willing to pay for them. What if some people are willing to pay more than others? Then businesses have to choose: either they practice price discrimination, i.e. try to sell each and every unit for exactly what that person was willing to pay, or they set one price that will attempt to maximize their profit.

You can find many examples of each. Anyone who auctions off their goods practices price discrimination. i.e. 3 identical baseball cards auctioned separately on Ebay fetch 3 separate prices. Same thing with a seller in a street market who gives different prices to different buyers (tourists vs. locals) and then haggles with each and every buyer.

My point is, people seem fine with this kind of price discrimination in a lot of settings, but not all settings. For some reason, there are certain settings and triggers that change their view from "hey this is how things are supposed to work, this thing is worth what I'm willing to pay" to "hey I'm getting ripped off!" Why is that? And what are the triggers?

Businesses put a lot of work into finding pricing discrimination "tricks", including discounts and premium upgrades, and that on the whole is a fascinating topic to me.

Re: Orbitz shows costlier hotel options to Mac users

#145

Post by AnIrishDuck » Wed, Jun 27, 2012, 12:01 AM UTC

czr80 wrote: post #141

AnIrishDuck wrote: post #140

Earlier quoted context omitted.

Close, but your example is missing a crucial piece. Specifically, the marginal cost of producing the product. Let's say the MC is 20 cents at the scale produced (Q1). The second group (students) get a MB of let's say 30 cents. They will not buy at a price of 60 cents, therefore there is a deadweight loss (MC < MB to students, but they do not have the good). If the monopolist can expand their output to Q1 + Q2 (where…

Umm... so you agree? Price discrimination can reduce DWL? By the way, there's no need to assume MC is a function of Q since that just complicates the example for no benefit (in the wiki article notice that MC is just a constant 10 cents). And yes, though I didn't stress it, of course the discount price must still be greater than the MC (and so in the range of 10 - 60 cents).

I didn't understand your argument at first; after you clarified I believe you are correct (with the corrections mentioned). My comment was intended to fix some flaws in your argument that rendered it incomplete, not incorrect.

I believe the constant MC assumption is dangerous though. MC is rarely fixed in microeconomics. It is almost always assumed to be an approximately linear function of quantity. Thus, increasing production will always increase MC. You'll need to hire more workers, pay more overtime, buy more expensive supplies, whatever (in the short run; in the long run firms expand production and the supply curve shifts). The assumption that MC won't change is almost always incorrect, and the MC changes affects whether the argument is valid or not.

Sorry if I'm sounding pedantic, just pointing out what my econ prof would've said to me about this argument.

EDIT: and I'm not trying to imply that you don't know any of this, just that it may benefit readers who have less economics exposure.