Since the earliest days of ecommerce, analysts have predicted that retailers would use their estimations of their customers' willingness to pay to invisibly, instantaneously reprice their goods, offering different prices to each customer.
Today, retailers appear to be varying their prices, but randomly, looking for the optimal price based on the market's prevailing condition, A/B splitting the price of pumpkin pie spice higher as Thanksgiving approaches, without anyone having to know about the impending holiday or spy on the user.
But users are seeing different offers based on their online profiles: if the algorithm thinks you're richer, it might show you a pricier set of earbuds to go with your phone.
Airlines are the notable exception, with maddening, opaque, wildly fluctuating prices based on the day of purchase and the itinerary, locked in an endless war with travelers that puts both sides of every transaction at each other's throats.
The retail psychology of this stuff is weird and interesting: people seem to value their purchases more not just when they've paid a fair price, but when they feel like they bested the merchant. Meaning that opportunities to get a bargain will be viciously pursued, long past the point of economic "rationality."
Now, bricks-and-mortar retailers have turned to algorithms to reprice their goods in their stores, making for some very strange shopping patterns indeed.
In their paper, “Detecting Price and Search Discrimination on the Internet,” the researchers suggested that consumers could benefit from a price-discrimination watchdog system that would continuously monitor for customized prices (although it’s unclear who would build or operate this). Another paper—this one co-authored by Google’s Hal Varian—argues that if personalized pricing becomes too aggressive, shoppers will become more “strategic,” selectively withholding or disclosing information in order to obtain the best price.
Which, to Bonnie Patten of TruthinAdvertising.org, seems like a whole lot of work. It’s already “so complicated,” she told me. “Everything is 50 percent off, but they have all these exclusions where it doesn’t count, and then everyone is trying to calculate 20 percent of 50 percent in their heads.” She already has a full-time job, was her point. And three kids.
“As a general matter,” she went on, “I find it so difficult to determine the actual price of the product that when I’m shopping for my kids, my new technique is to make all my decisions at the cashier. I pick up lots of clothes. I completely ignore all pricing until I get to the register. And then if something is too much, I say, ‘I don’t want it.’ ”
This struck me as sensible in the extreme. And how did she shop for herself?
“I do not shop,” Patten said.
In what sense?, I asked, confused.
“I just gave up,” she said. “I just stopped shopping.”