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Privacy: For the Rich or for the Poor?

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6 Responses

  1. anon says:

    If the authors of this paper bothered to study microeconomics, they would have known what happens to prices and consumer surplus when producers can price-discriminate instead of charging the same price to all consumers. Hint: the poor do NOT subsidize the rich. Rather, the rich subsidize some of the poor: rich consumers pay more, and some poor consumers get access to previously inaccessible goods. One can think of adding various complications to the model, but nothing in this post suggested that the authors made the smallest move in a coherent direction here. People should stick to the topics they know something about. I guess in this case, the authors’ expertise is in debating whether price discrimination is, like, totally immoral, or something.

  2. leolabeth says:

    Dear @anon,
    Though your argument is familiar and intuitive, maybe we should wait and read the paper before condemning the whole premise.
    What objection do you have to more transparency in terms of the use of our information?

  3. arthur says:

    The argument makes no sense. Selling to rich people is profitable, and it becomes more profitable due to higher volume when the retailer offers “free” caviar and discounts. But the discounts make sense only as long as the sales to the rich remain profitable without regard to what poor people are paying. When sales to the rich become unprofitable due to discounts, it’s time to cut discounts, not to raise prices on a different group of customers. You may notice that when Orbitz though you were rich, they wanted you to pay more than you would have paid otherwise.

    To the extent selling to poor people is profitable, the retailer won’t use profits to subsidize sales to the rich, they will just pocket the profits. That’s the Walmart business model.

  4. anon says:

    Leolabeth: I said “nothing in this post” suggested that the authors had any clue of the huge, vast, enormous microecon literature to which they purport to contribute. It’s possible that they discovered something new and unique, and in fact contributed to it, but it is HIGHLY unlikely.

    Re objections to more transparency on the use of information — the same as objections to any expropriation of property that another party created by mixing labor into it. These companies create data; put a lot of money into it; “disclosure” will reduce its value, and they’ll either produce less of it or produce it in the form that cannot be meaningfully disclosed. Again, perhaps a person capable of doing modern micro analysis can add these considerations into the model and show that disclosure is still worthwhile, but, as best I can tell, this isn’t something that these authors are capable of doing.

  5. Tony says:

    Sorry to troll-bait, but re. anon’s comment: the paper does not appear to be describing price discrimination, which occurs in imperfectly competitive markets where a supplier can set separate price points for people with different reservation prices. What it describes, rather, is a situation where a supplier effectively lowers the price of elastic goods like beluga caviar (by offering some of those goods for free through promotions etc). The goods that poorer people are willing to buy (milk, bread etc.) are, presumably, relatively inelastic compared to beluga caviar, and it therefore makes sense for a supplier to raise the price on those goods, thus leaving poor people (who need to buy basic staples) with less discretionary income.

    Of course, the obvious objection is that poorer people could simply buy from suppliers who don’t engage in these practices, and are therefore able to keep the prices lower on the inelastic goods. Presumably, however, they’re not describing a perfectly competitive market, but one with transaction costs for switching suppliers.

    Perhaps I’m wrong — I haven’t read the paper. My real point is to suggest that commenters avoid writing hostile, vituperative comments — particularly when they betray the commenter’s ignorance of concepts about which they are accusing others of being ignorant.

  6. Ken Arromdee says:

    Whether raising the price of bread brings more profit is independent of whether lowering the price on caviar brings less. If companies actually thought that raising the price of bread increased profits, they would raise it all the time, not just raise it when they need the increased profits to compensate for the loss on caviar. After all, they want increased profits all the time.

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