We all get excited when we get a good deal on something we buy. But what if other customers are being charged more for no good reason?
Like many of us, I love a good deal.
I also happen to be from New Zealand, so (while I enjoy living in the UK) I’m always looking out for a reasonably priced trip home.
Late last year, I was incredibly excited to discover flights from London to Auckland for just £415 return departing in March. Typically, I’d consider £600 ‘cheap’. Of course, I quickly snatched them up and am still feeling pretty chuffed with my luck.
But I’ve recently checked the prices again and discovered that passengers next to me could have paid more than three times as much to make exactly the same journey. This is a fact I’m sure they’d be far less impressed with. I guess I should let them have the middle arm rest?
One product, two different prices
This isn’t unique to flights, of course – it’s everywhere.
And economists have a name for it: price discrimination. Broadly, it means people paying different prices for the same thing.
The charges have to differ for reasons going beyond the basic costs of supply – if you get charged more for something because the cost of raw materials has risen (for example), then that’s not price discrimination.
But sometimes retailers charge different amounts for other reasons, such as the demand for their product is higher at particular times of day.
Sometimes price discrimination can be good – such as with pensioner discounts. But it can also be hidden from consumers.
How price discrimination works
So what is price discrimination like in practice? Here are a few examples of the different methods retailers can use, which, depending on your point of view, could be seen as good or bad.
- Demand: cinemas and theatres charge more for you to attend on weekends and taxi-competitor Uber charges ‘surge’ prices during busy times, such as on New Year’s Eve. With the latter, this will mean that more drivers come on to the road, so you’re more likely to find a cab to take you where you want to go.
- Location: pricing can change based on suburb, city or country – one example we came across was a Eurostar trip from Brussels to London in Business Premier which cost £245 on the UK site but €330.50 (around £280) on the Belgian version.
- Convenience: we explored how much convenience supermarkets charge when compared to the nearest equivalent supermarket. We picked a basket of goods and found it was up to 7% more expensive at a convenience supermarket.
- Personalisation: if retailers have access to information about you, it’s possible this could be used to affect pricing. A basic example is loyalty cards, which can lead to you being offered discounts on certain products.
- Loyalty: mobile phone, subscription TV and broadband providers will often give exclusive offers to loyal customers to try to keep them. For example, if you call to cancel, you may find you get offered a discounted rate.
Can you think of any price discrimination you’ve spotted recently? Are there examples you’ve felt were good and fair, or does it always feel like you’re on the unlucky side of things?