I mean we are in the age of digital pricing, even on the shelf. Modern price collusion is more apt to happen with A/B testing if prices at locations to see what the local market will bear.
I've seen Walmart do this in the past. Items that were not on sale could have significant differences in price, where in general the prices in more affluent areas are higher. We're talking 50 to 75 cents on common items, but sporting goods quite often had a different of 3 to 5 dollars.
Labor and land prices in more affluent areas will be higher, so it is expected COGS will be higher.
However, Walmart now displays in store and online for pickup prices on their website. I walked into the Walmart and paid $1.11 more than if I were to have ordered it via the app on my phone or website for pickup.
And Walmart was very upfront about it, and I knowingly paid $1.11 more because their online order and pickup option sometimes makes you wait 20min+ for a Walmart employee to come out and give you what you bought (even after it says your order is ready for pickup).
You can see this happening all the time on Amazon these days if you use a price tracker. Most items are swapping between two prices that are maintained for periods and little peaks just a little bit lower and higher to test response. Then when you take that and look across different countries stores you can see they are running different pricing and running tests globally while the price is being sustained in others.
Enormous amounts of price testing with a very clear strategy that is easy to see in pricing charts.
Having a single flat price is/was due to labor prices being high enough in the developed world to ignore potential profits from price discrimination.
When my grandparents went to the market in the developing country they immigrated from, they would bargain for everything, and every customer got a different price.
The developed world was rich enough that grocery stores didn’t need to waste time doing this, and could simply price high enough to earn a consistent profit margin and expect consistent sales. They did engage in price discrimination via coupons. Just not individually, until smartphones and apps came along.
Now that automation can handle a lot of the price discrimination, expect more of it, everywhere.
It is not only about labor prices being high enough (creating consumers who can buy more). There is a significant religious component to the introduction of fixed pricing. Quakers are often credited with introducing fixed pricing in the Western world, because they felt that charging higher prices to those less able to haggle (or higher prices by age, gender, race) was immoral, dishonest in the eyes of God. They then experienced greater sales because you could send your kid to the store and trust the kid wouldn't get ripped off. It just took a layer of stress off going to the store. John Wanamaker (a Presbyterian?) I think is the one who really started a retail empire on fixed pricing. One of his main selling points was one price for anyone, and a fair return policy.
The behavioral economics here is that many people will pay a consistent (fair) price to not be surprised and not feel ripped off.
Agree that automation will engage in price discrimination whenever possible. When will we see the backlash? I have heard stories of outrage ("when I looked for airline tickets at work they were way cheaper than when I looked on my home laptop!") but we haven't seen a widespread reaction, and the moral aspect seems to be relatively overlooked at this time.
Yeah, dynamic pricing isn't just for airlines anymore, it's quietly baked into everyday retail, and most don't even notice
I don't know. Surely the biggest impact on Amazon's prices, for example, is that it is disguising a $7 shipping cost inside the $0.10 items that are priced for $8? Or disguising $100 of prepaid shipping as a "Prime" membership?
> Modern price collusion is more apt to happen with A/B testing if prices at locations to see what the local market will bear.
One of my first thoughts as well. If you're big enough, you collect so much data and run so many experiments all the time that you know exactly what you'd do if/when there's any competitor on the scene. Not only is there no need to talk to them and make backroom deals, but barely any need to even observe them. You priced like they did/would/could at some point already anyway. At a certain scale and if you already know the price that the market can tolerate.. the most relevant hidden information you want to know is how much cash your competitor has access to. That tells you whether you can win the price-war to sell at a loss for long enough to ruin them, buy them, move on to integrating verticals etc.
Game theory is interesting but also a bad model to the extent that it assumes persistent players with changing strategies, whereas average case in late-stage capitalism is more likely to have players eating players, no new players can enter, players changing rules, etc. As a CS nerd I still like a game theoretical approach better than most econ, but at some point we need to give up on tidy formulas and closed-form answers, and go all in on messy simulations.