Monday, May 3, 2010

Price Discrimination and Self-Incrimination

I just got done reading The Undercover Economist by Tim Harford. It was an enjoyable book and I wanted to post about the part I found to be the most interesting- price discrimination by businesses and self-incrimination by consumers.

Harford explains that there are people that, for countless reasons, are willing to pay more than the general population for goods and services. He then shows three ways stores encourage certain customers to pay more for the products they buy; Unique Targeting, Group Targeting, and Self-Incrimination.

I admire the Self-Incrimination method the most and I've searched out local examples since reading this book. Price discrimination is everywhere and you can save money by looking out for it. I have, as an example, included two photographs of food taken at Target. Target has ramen noodles in two spots inside the store. On the pasta aisle you can purchase one brand of ramen noodles for a little over $.10.



On the Asian food aisle (only one aisle over from pasta) you will find a different brand of ramen noodles for $.70 per package.



I see two things happening here, Target gets people that don't take time to search for the cheaper noodles elsewhere in the store, and Target gets people willing to buy a “premium” brand of ramen noodle at a higher price (7 times higher!). I purchased both brands, just to make sure the expensive brand wasn't lined with 24k gold foil, and I couldn't tell a difference in quality or taste.

From Amazon:
Maruchan Ramen Noodle Soup - 36/3oz




-P. Econmancer

2 comments:

  1. Very interesting! What else have you found?

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  2. Thanks! I also noticed Fruit of the Loom undershirts in a five pack are $.35 cheaper than Hanes five packs.

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