In Wednesday's edition of KUOW's morning program "Weekday," host Steve Scher talked with Tim Hartford of the Financial Times about how retailers manipulate pricing in order to differentially price goods for different groups of buyers (for instance, senior citizens, for whom shopping around has more value due to both living on fixed income and being retired and having more time on their hands, are given discounts to combat that shopping around tendency).
A number of callers, however, seemed to feel that these strategies were not just unjust--some even implied this behavior on part of retailers to be outright trickery--but that a shopper derives a certain moral superiority from shopping around and sticking it to the man.
One might question, however, to what degree these same individuals pore over their bank statements to determine if they are getting the best interest rate, or calculate the relative return on investment from replacing their spark plugs, thus getting better gas mileage, versus sitting on it to save the cost of new parts.
More to the point, I think, is the observation that declining marginal utility makes it possible for retailers to extract significant extra profit from insignificant price hikes aimed at unaware consumers. This doesn't make these retailers cruel; they are merely intelligent. As for the consumer, those in the classes for whom the extra cost is significant are able to shop around. Those who do not shop around for every purchase are not necessarily stupid or frivolous, they simply know the value of their own time (this being why, as Hartford pointed out, Americans bargain over cars and real estate, but not over daily groceries, whereas in poorer countries with higher rates of unemployment (or partial employment), such haggling is common over even the most trivial of items).
Holiday Shopping Secrets with the Undercover Economist
December 20, 2006
KUOW's "Weekday"
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