San Francisco: Don't Fall for Industry Defense of Surveillance Pricing

I had an interesting conversation with an coworker recently -

If you give an agent a budget of $500 to buy a flight, and the airline knows this and bumps your price to $499 even though it will offer the same flight at $300 to someone else, is there harm done? I argued it feels unjust. He said it's totally fair, it's within budget so what's the problem?

Naturally this trends towards a sort of principal-agent problem where the airline is incentivized to bribe your agent for up to $198 to max out your budget (which is a problem if you're not running your own agent).

But for general personalized pricing, there is the same dynamic to posture that you have a limited budget so that companies offer you better prices (regardless of whether you really do or not). This is haggling culture at scale.

I worry about a world trending towards this sort of thing and away from clearly universal prices and wrote about this at the beginning of the year: https://digitalseams.com/blog/the-behavioral-cost-of-persona...)

Like most people, surveillance pricing feels gross to me. But I think we need to separate two things: Surveillance pricing is a combination of (a) price discrimination and (b) surveillance.

If it were up to me, I'd probably give people much stronger legal rights to control their personal information, which would in turn decrease "surveillance".

But I haven't seen a convincing argument to ban price discrimination. There seems to be some kind of implicit assumption that price discrimination reduces consumer surplus on average. But I've never seen a convincing argument to that effect.

For example: Pharmaceuticals are often priced much low in poor countries. That's price discrimination. (You could think of it as a primitive form of surveillance pricing.) But if that were banned, pharmaceutical companies wouldn't lower prices for everyone. That would destroy almost all their revenue which comes from high prices in rich countries. Instead, they'd charge rich-country prices to everyone, and most people in poor countries would simply have to go without. That seems like it would be pure harm.

It's entirely possible that some kind of "coarse" price discrimination is OK/good but "fine-grained" price discrimination is bad. But where's the argument?

I generally agree with the statements here but the example of the baby thermometers seems to be a false equivalence since there is no variation of pricing of the products but instead it's a personalized search results page that takes into account what they think this person might want. It actually would seem silly that a newborn parent would NOT want a baby thermometer and it just so happens that baby thermometers tend to be pricier. I know the stance from the EFF is likely that everyone should see the same search results and only allow a direct ly expressed query to influence the sorting/ranking.

I suspect part of the reason this is playing well on this website is banning surveillance pricing is great for rich people. I don't have the time or inclination to coupon or aggressively cross-shop but I benefit a lot from the less well-off folks who do. The grocery store, without any ability to differentiate, has to assume that I might be one of those people and sell me a banana at the same price.

Bill: https://leginfo.legislature.ca.gov/faces/billTextClient.xhtm...

I agree that surveillance pricing sounds terrible and discriminatory. But people are also happy with coupons, codes, introductory pricing, employee discounts and many of the other schemes that do more or less the same thing. One guy who worked for an athletic shoe company told me that they had a special code that their sponsored athletes could give to their friends.

In the end, what's the difference?

This is what I think of when I think of personalized pricing:

https://www.youtube.com/watch?v=rVlT3uHlNAg&t=111s

It's pretty much what I've done when selling at flea markets all of my life. I ask what I think the market will bear, per person and situation. I don't feel at all guilty for it. It doesn't surprise me at all that mass customization in the information age has brought us to it at scale, or that the force of law would be necessary to repress it.

Some people seem to feel they have a right to the best price without negotiating or shopping. I don't feel that I'm owed or owe that privilege.

To me it's insane how popular surveillance pricing is in discussions on HN. I think that so far it is the pinnacle of useless rent-seeking from the tech-finance alliance. Bit by bit eliminating the 'inefficiency' of people not giving companies the last few cents they have remaining. Evil.

At first I was quick to assume that the proponents of these schemes work in adtech, data harvesting and processing companies, or are just extremely rich and poised to become the beneficiaries of all the surveillance. But so many people are bringing up things like regional pricing for poor countries, coupons or other types of discount that it makes me feel like they think this will benefit them. Are we really about to fall for the 'if you just let us track you, you will be rewarded!' scheme all over again? Did we forget when credit scores were promised to provide anything positive to the customers, but instead became exclusively a way to punish the worst offenders? You don't get anything from a good credit score anymore. Or what about letting your car insurance company track your movements under the promise of discounts which quickly turned into the promise of a lack of a punitive rate hike if you drive well?

Giving you a good deal is not profitable. Whatever mind tricks you think you'll be able to play under a surveillance pricing regime will not work. They will always be three steps ahead of you.