Price discrimination is technically illegal, but there are a lot of loop
holes, plus the FTC and the Justice Department basically stopped enforcing
this aspect of Anti-trust in the 1960s. Much of the kind of price
discrimination you mentioned below is allowed because and airline ticket or
hotel room purchases under different conditions or circumstances (e.g.
non-refundable vs refundable, etc.) are considered distinct products.
Basically they are allowed to get away with murder because the economists
who influence anti-trust policy are ambivalent about the 'welfare' effects
of price discrimination. It goes without saying, in situations where it is
really damaging, i.e. - the poor pay more - there has been almost no
enforcement. Not to mention all the way the drug companies essentially
employ disguised versions of price discrimination.
-----Original Message-----
From: Ellen Frank [mailto:[EMAIL PROTECTED]]
Sent: Tuesday, March 20, 2001 9:14 AM
To: [EMAIL PROTECTED]
Subject: [PEN-L:9180] Re: Pirce discrimination
Is price discrimination really illegal? If so, why can airlines, hotels,
car rental companies, etc. change their prices from hour to hour,
even minute to minute? A couple of years back, Coca-Cola was
looking into a soft-drink vending machine that monitored outdoor
temperatures and adjusted prices accordingly.
Ellen
[EMAIL PROTECTED] writes:
>Nonsense. The higher price paid by and to scalpers reflects price
>discrimination. It is only the few hardcore fans or people who need to
>buy
>tickets on short notice that are willing pay the higher price. In theory,
>ticket agencies could also reap these extra profits by charging a
>different
>price to every consumer according to indvidual willingness-to-pay, but -
>1]
>blatant price discrimination is illegal, 2] they lack the informational
>mechanisim to determine individual willingness to pay. Scalpers are able
>to
>determine the latter through the extra-legal channel of selling hot
>tickets
>at the venue where those with the highest willingness to pay are likely to
>show up. This is so Econ 1 it is hard to believe your professor is
>serious.
>But this probably only reflects the poverty of academic economics when it
>comes to even elementary considerations of real market behavior.
>
>By the way, I wouldn't be surprised is ticket agencies aren't trying to
>figure out ways to increase their ability to exercise price discrimination
>by collecting or purchasing information on individual performance tastes
>via
>internet consumer surveys.
>
>-----Original Message-----
>From: Andrew Hagen [mailto:[EMAIL PROTECTED]]
>Sent: Monday, March 19, 2001 7:34 PM
>To: [EMAIL PROTECTED]
>Subject: [PEN-L:9166] maximization?
>
>
>A professor of mine started class today with an interesting question:
>why don't ticketing companies raise prices to the level that the market
>will bear? Often these companies hold a monopoly in selling tickets to
>all events at a particular venue. Currently the event ticket market can
>bear higher prices, as evinced by the higher prices paid to scalpers,
>AKA the secondary market. It's apparent that raising prices would
>maximize profits in the primary ticket market. Why don't they do so? My
>professor's proposed answer was: companies do not want to maximize
>their profits; they only want what they perceive as a reasonable return
>on their investment. It seems to me like a plausible assertion.
>
>Could someone point me toward an article or book that questions the
>maximization assumption?
>
>Thanks,
>
>Andrew Hagen
>[EMAIL PROTECTED]
>
