Although this real-world application provides an example of an abuse of a pricing technique, it shows how the pricing technique works nonetheless. The application then invites thought on the ethics of various pricing techniques (abused or not), which may allow firms to increase profits at the expense of consumers. Consider the following:
- Does the fact that effective non-uniform pricing (NOT single pricing) raises the monopolist’s profit at the expense of consumers make it an unethical practice?
- Is it fair to charge consumers more for a product just because they value it more? Does it matter why consumers value the good more?
- Firms often gather information regarding tastes, preferences and willingness to pay from consumer searches on the internet and the use of things like the “Martin’s Card.” In fact, in late 2010, the FTC proposed a plan to let consumers choose whether they want their internet browsing monitored by online businesses and advertisers. Is this a violation of consumer privacy? Is it fair that firms can then use this information to charge consumers higher (or lower) prices?
Time permitting, our classroom discussion will take place on Thursday, April 12.
Posted by Prof. C-S