I Got It Cheaper Than You Essay

318 WordsFeb 14, 20122 Pages
WHAT DO American Airlines, Glaxo Wellcome, Staples, Intuit, Stanford University, CDnow, AT&T, Simon & Schuster and Safeway have in common? They all engage in price discrimination. They charge some customers more than other customers for the same thing or almost the same thing. Price discrimination is an old game, probably dating back 3,000 years or so. You cut a special deal for some customers but not for others, depending on how likely they are to take their business elsewhere. Now the game seems destined to get a lot bigger, both in frequency and in complexity. The reason? Technology. If you are the kind of person who is ticked off about paying $1,200 for an airline ticket while the fellow sitting next to you paid $500, brace yourself. Computers are making it easier for vendors to play this game when you are shopping for just about anything -- a CD, a piece of software, a dress, a book, a doctor's visit, a movie. A new wave of price discrimination is coming, says Hal R. Varian, dean of U.C. Berkeley's School of Information Management & Systems. Computers are going to discriminate not just between business travelers and leisure travelers but between Smith and Jones. "There's going to be a massive expansion in price discrimination as the cost of MIPS [computing power] goes to zero," says Jay S. Walker, founder and vice chairman of Priceline.com. In Walker's world, you don't complain about the unfairness of it all. You just try to turn the discrimination game to your advantage. Priceline.com allows travelers to cut special deals for airline tickets booked at the last minute -- $400, for example, for a trip from Washington, D.C. to San Francisco, against the $1,200 full fare. Using complex software that shops bids from travelers to 18 airlines, Priceline.com brokers around 1,000 tickets a

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