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0 pointslotsofpulp7y ago0 comments

The value of an item is decided at the time an agreement is made between a seller and buyer. There is no one size fits all "value" until then. This can easily be seen in goods such as low volume, high margin goods such as land, vehicles, heavy equipment, intellectual property, and of course, labor.

However, in the developed world, logistics and supply chains have sufficiently developed to allow for minuscule margins on many everyday, low price items that make it uneconomical to negotiate the value of each item to each buyer, so the seller just lists one price for everyone.

In markets in poorer countries, the seller might not do that, and it might be worth their time to negotiate each sale. If they say to one buyer "I'll sell this to you for 50% off today, and charges him the same price as yesterday, and the buyer agrees to buy", who is harmed?

Price discrimination is a natural part of markets, and the only reason it hasn't been happening is because it wasn't worth the retailers time in the US. But with automated systems coming into place, there is no more labor cost and so it's becoming economical to price discriminate again.

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mcv7y ago· 2 in thread

If you want to get technical about it, the value is determined by the market, by the forces of supply and demand. Advertising with a fake discount suggests that the market was willing to pay more for the product than it actually was.

Most products are actually sold with a one size fits all price. People don't haggle over every single item they buy in a shop.

lotsofpulpOP7y ago

The market does not pay for anything. Individual buyers pay for things, and individual buyers and sellers determine the value of items, at a certain place, at a certain time.

Most everyday items are sold “one size fits all” (but not in large quantities) in developed countries (since the seller's time is valuable enough to offset the extra revenue (or loss) from price discrimination), but there are quite a few places in the world where people still haggle over the price of tomatoes and onions.

But even in the developed world, once you move beyond low margin retail items that are not expiring goods, there is no single sale price. Sometimes price discriminating turns off more customers than the revenue it generates or the labor it costs the seller, so it doesn't make sense for a seller to do it. Sometimes it's worth it, so some sellers might.

mcv7y ago

Do we really need to deconstruct all of economics here? The market consists of those individual buyers and sellers. But they set the value together. No single buyer can set the value of the items they want to buy in the supermarket. They buy them or they don't buy them. In response to that, the seller adjusts the price. If not enough people buy it, the seller lowers the price, if he runs out too fast, he raises the price. That is "the market" determining the price in a free market.

So if a potential buyer sees something 70% discounted, that implies that originally, the market determined that higher price as a fair price: a price that at least some buyers would pay for this item. The buyer trusts the market that that is apparently a fair price, but today the buyer is in luck, because it's been discounted to below the usual market price!

If the seller advertises with a fake discount, he's betraying the buyer's trust in the free market by intentionally lying about what the market is willing to pay for this item.

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