Personalized ad targeting and personalized pricing are both predicated on mass surveillance and then leveraging that for manipulation. Both sides of that toxic combination are compounded in significance due to severe two-way centralization of those markets.
The result is leverage pervasively used to select information competitive with customer value. And also used to drain margins from ad buyers and all upstream economic input.
People complain endlessly about the downside to surveillance and personalized manipulation, but don't seem to have an appetite for more than that.
I view the centralization, surveillance and manipulation as all ethical problems, because they all involve negative externalities (weaponizing unpermissioned or dark-permissioned information, manipulating people based on their past behaviors and characteristics, and bleeding product providers).
Scalable ethical problems that pay, are not resolved by any means that don't resolve the ethics with economics. I.e. law or hard regulation, backed up by considerable fines ensuring risk-reward losses for perpetrators, and criminal charges for serious or repeat offenders.
Given the tremendous centralization and privacy violations, the problem is orders of magnitude worse than normal price fixing.
There was an article about targeted advertising a number of years that really changed my perspective on it called, "Targeted Advertising Considered Harmful": https://zgp.org/targeted-advertising-considered-harmful/
The basic idea is that the real value in advertising is as a signaling mechanism, and targeted advertising removes most of that signal.
I feel like personalized pricing has some of the same issues, in that it erodes consumer trust and makes it more and more difficult for consumers to confidently spend their money in the market. I am not sure how we fix the problem, though, because it is a collective action problem; any individual company will need to use personalized pricing to compete, but that behavior will hurt the economy as a whole.
I don't know the solution to this problem.
There's bqsically IMO two types of ads - marketing and sales.
Marketing ads are signalling, brand recognition, etc. You want the cool earbuds that everyone knows. You want to buy them from a big, reputable company with good r&d.
Sales is simpler - click on the ad and buy the product. It tends to be a bit sleasier - sales doesn't care as long as it makes a sale.
There's often a bit of tension between sales and marketing. A 50% ooff exploding offer can be good for sales in the short term, but can make the brand look cheap.
The in-industry terms for these are "brand marketing" and "performance marketing," FWIW. Brand marketing is the first thing, performance marketing is what you're calling sales.
Don't ban it, just require that next to the current price merchant displays low/high/median price for the same good/service in the last 30 days.
Exactly. Most of the icky stuff is based on a lack of consumer knowledge.
Why isn't making it illegal a solution?
> that behavior will hurt the economy as a whole.
I don't quite follow... Advertisers want their product sold. Consumers want to buy whichever product is most suitable for their needs (based on both price and performance), ad networks have every incentive to connect these two.
In an ideal world an ad network would show me 10 ads for products I want to buy (ie. new shoes, ice cream, etc). I would have confidence that those products are the exact ones I want and that any more research would only show up inferior (worse value) products.
The ad network gets to take no profit margin - since if it did, I could find that same product cheaper elsewhere.
This leads to an equilibrium where the ad network shows mostly the perfect products - and charges a small margin - where the margin size is set to be slightly below my willingness to shop around for a better deal.
Personalized pricing just represents different users estimated willingness to shop around - but if the model is correct, even those paying a higher price are happy with the situation or else they'd shop around.
Ad networks have every incentive to lie to consumers to get a sale. If the strength of the economy is measured in total sales, that's great. If the strength of the economy is measured by consumer satisfaction, not so much.
An ideal ad network would not show you a product ideal for you, but a misleading ad for the lowest-cost product you'll buy for the most expensive price, with 95% of the difference pocketed by the ad network.
Informing the target that a product exists is a small part of advertising. It's important for the small players, but for the big advertising spenders it's much more about communicating values, trustworthiness, emotions. Building a brand image, and maintaining brand awareness
Just the fact that you are running an advertising campaign of a certain size used to be a signal in itself. Same with advertising in or for subcommunities. That signal is heavily dilluted by targeted advertising
Similarly, personalized pricing is removing signal from the price. Sure, price was always a noisy signal, but better a noisy signal than no signal
What is the incentive for ad networks to suit you to whichever product best fits your needs? On price, if an ad network knew how much you needed something, why isn't their incentive to show you the the highest confidence-weighted price you'd pay rather than the absolute best deal?
e.g. if they know you absolutely need to get on a flight (dying family member or something), what is their incentive to find you the best one rather than gouging you? And if they sell that information to other groups so everyone knows to gouge you?
None of these ideals are how reality works though. In reality consumers aren't completely rational, don't have access to perfect information, and the models for pricing/advertising have perverse incentives to extract as much as possible from consumers.
>In an ideal world an ad network would show me 10 ads for products I want to buy
Ideal for who? What if you don't want to buy anything, much less have all of your personal information hoovered up and sold/shared/exfiltrated around to everyone in the world for the benefit of the advertisers that have no value for you?
> I am not sure how we fix the problem
Regulation that causes big business to lose money and rich people to be a little less wealthy so society is better
no that's crazy talk. There must be some super obscure technological solution to a societal problem. Ideally something that can be sold as a SaaS.
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“Collective action” < union < regulation
... < union + regulation
... < democratic socialist republic without social media
You don't need to resort to communism, you can have a market economy where companies are owned by their own employees. It took millenia for humanity to dump its broke-ass monarchies for democracies, and yet we still haven't realized that our prevailing corporate structures are just the same broke-ass monarchies with a king at the top and the serfs laboring beneath.
ares623 did say "democratic socialist"
Price discrimination is bad. It's worth trying to ban. You'll never stop 100% of it (and trying to go too over-the-top in terms of stopping it would not be worthwhile), but this is a useful area for regulation.
This is why I like buying in a physical store. I also think the only solution to this practice is really just to avoid buying as much as possible. I never get food delivery and only get uber to go to and from the mechanic. Ditto for the medical system, I got charged $400 for a strep throat test. I’ll just stay home until I feel better
I wish it were easier to have ephemeral interactions with companies. Why do I need a tracked and maintained user profile for things like Uber? Shouldnt it be possible to only interact for the single transaction, ending as soon as I leave the car.
I imagine trying to continuously cycle accounts will run into various blocks, e.g. you can't sign up using your email/phone/credit-card because it is already linked to an existing account.
I hate the way the world is going. As the article states, Uber can probably classify my exact spending habits to maximize a price I'm willing to pay for. But id much rather them have to treat me as a new soul every time, and hopefully along those lines have to fight a bit harder to get my business.
On the other hand, if you're an Uber driver it is nice to know the person getting into your car was rated positively (not a dangerous individual, smelling of alcohol, etc.)
But I have actually no idea if drivers can say "no" based on ratings.
In general I would agree with you.
I'd rather have those smelling of alcohol be passengers than drivers.
A key part of uber is the ratings system and bans, so they do want to track your behavior across interactions with their drivers (or riders, in the flip side).
This is why I refuse/back out of eshops that require accounts. Has the unintended upside that I often think twice about buying something and often dont. If I really need something though, ill create an account with a filler email, receive my product, and then make a really tedious (for the company) GDPR request because sometimes I like to be petty. Then I delete my account. If I need something from that store again, I will repeat that process.
A lot of the theoretical underpinnings about why capitalism is a good system are based on the law of one price. Especially in the context of an oligopoly, being able to price-discriminate on such an individual level leads to really bad outcomes.
>A lot of the theoretical underpinnings about why capitalism is a good system are based on the law of one price.
Why? Competition for instance, works fine even with price discrimination, because bidders will still compete with each other on offering the lowest price.
In the context of an oligopoly, normal pricing pressures break down, especially in real world conditions where price fixing is rampant.
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New job: poor person personal shopper. Someone with a "poor" profile follows you around the store so you can use their quoted prices instead of your own. Or travel agents that only book flights for you using early-2000s flip phones, shielding clients from the iPhone premium price.
The "poor" people would be getting the raw end of the deal - their profile would soon become "wealthy" and they'd have to pay more themselves.
New job: "look poor" behavioral assistant. They manage an account for you that signals low purchasing power.
Poor people always get screwed over the most, desperate people are easy to take advantage of and there will always be there to exploit them.
I recall an article on personalized pricing that had it reversed - the poor pricing is actually higher, bc it's harder to buy more at bulk rate / shop around / just not buy it (discretionary).
Yes, aka the boots theory or at least similar to it: If you can afford a higher upfront price you have options with a better value over the products lifetime - bulk discounts are just a special case of that.
My friends just booked a trip to Hawaii on booking.com and they were each shown different prices for their hotels: $1300, $1500, $1700
Ridiculous.
> Who knows why? I’m usually more willing to spend than she is, and I bet that's represented on my user profile. I was paying with a gift card, which surely contributes. Maybe it was a price scraping update, comparison shopping detection, or a system that explores “face-in-the-door” high prices before backing down. From the outside, no one really knows.
The most obvious possibility omitted is that your wife got the first, easy, cheap car and then Uber had to quote you a higher price to get a second car. Cars don't fall from the sky; if two people successively ask for bids, how else could it work? What if the app quoted you both the cheap price for the only car within X blocks, and you bought it before she did? Is it suddenly going to go 'oops sorry, changed my mind, it now costs twice as much'? Sounds like a very bad experience to me! More sensible to give the first person a low quote and then when - unexpected and unpredictably - someone requests something similar, quote them the higher price reflecting the sudden local micro-shortage.
(author here) I believe I had checked first in this case, which is why it was surprising. Sorry not to mention that in the post. This was in San Francisco, and there were multiple cars shown on the map.
In my experience, I usually don't see this kind of price change before the request has actually been confirmed - and I have seen Lyft change the price between showing me the estimate and confirming the request (with an apologetic confirmation dialog, possibly only after some holding period has timed out).
Maybe in my case where the high quote came first, the opposite scenario happened - a glut of drivers appeared between my request and hers, raising supply.
Opaque pricing is powerful partly because we don't know. This enables people to construct a plausible story to explain any price.
Well, whichever one checked first, the point still holds. Checking is not a free operation and you should expect it to have consequences and it to affect Uber's demand forecasts etc., and affect other price quotes. You do not have independence here and so the comparison is not as meaningful as it seems. As the Roman wit said, "when two people do the same thing, it's not the same thing."
(The right way to do this is to randomize multiple independent occasions - wait until one of you was about to call an Uber, immediately flip a coin to decide who does, each time checking you or your wife's Uber, and never both, and compare the long-run average.)
> with an apologetic confirmation dialog, possibly only after some holding period has timed out
Right. I've seen the same thing myself. They would prefer not to apologize to the customer because they changed the price, because it is in fact annoying and a bad customer experience. So the prices are surely carefully set in many ways with an eye towards not changing as much as possible.
> This enables people to construct a plausible story to explain any price.
Indeed. So you should mention one of the most plausible stories if you're going to list a bunch of them.
it would be great if this were the case. unfortunately, Uber has been documented to practice individual price discrimination at a massive scale, using factors like if you’re in a low-income vs high-income neighborhood, individual rider “price sensitivity”, etc, in addition to market conditions (surge pricing), and as a result they have netted billions in profit [1]. i would guess this is why Uber AI researchers are paid so much.
[1] https://len-sherman.medium.com/how-uber-became-a-cash-genera...
That raises an interesting question: if 10 people in a room request ubers without confirming the ride-hail, does the price go up for successive requests?
Hm... I think I would predict that it would depend on speed because querying prices reveals information, but not accepting also reveals information, so I would expect that it would go up initially due to an expected shortage, but then when it becomes clear that no one is accepting, it reverts to normal or lower, because that suggests low urgency or willingness-to-pay compared to what the models had forecast for that exact location & time, so they have to be offered lower prices to accept at all.
(This is the flipside of personalized pricing: it's also lower prices, as noted in some of the anecdotes, although he mostly emphasizes the potential for higher prices.)
This is why I rarely join those 'customer loyalty' programs that almost every store offers.
I say 'no thanks' when the cashier wants to know my phone number, even if I am paying cash.
It is almost impossible to remain anonymous in the consumer space, even if you are really trying.
Being anonymous is actually pretty expensive. The loyalty program is a price discrimination mechanism: going through the trouble of clicking through coupons, discovering deals, signals that you have a higher price sensitivity. The default of taking no action signals a higher willingness to pay. Also, by paying cash, you're subsidizing the card users, some of whom get a bit of that back.
i am paying for my privacy. or, i am refusing to sell out my privacy for any amount of money. and i disagree that it is expensive. the difference can't be more than 10-20%. that's worth it for me.
It's not clear you're actually buying any privacy. The cameras they have in stores will be used for tracking customers soon anyway, and not having a tracking identifier associated with your transactions make you stick out like a sore thumb.
camera tracking is illegal in many places, and while my shopping may stick out, it still can't easily be tied to my identity. i only pay with cash too. the only place where i use cards is on ATMs.
the only place i have one is a grocery store where their loyalty program price is listed on the shelf tag and is lower, often by quite a bit (a third to half off is common). even then, i use one of the meme phone numbers (local area code + 867-5309, 678-999-8212, 281-330-8004, etc.).
The day I learned of ghost Facebook profiles, I realized fighting back was impossible.
is https://en.wikipedia.org/wiki/Price_discrimination very different from buying things off ebay? why would salespeople even exist if there was perfect information?
so people want efficient markets and price discovery..but only when it results in them paying lower prices? otherwise the law should step in and preferably set prices by fiat or magic?
ok my personal take on buyng knick knacks in chatuchak is.. assume everything is cheap , thats why i come to thailand, i can afford this...
I'm wondering whether or not the attitude towards shoplifting and the like is going to loosen with more and more dystopian shit being pushed. I can imagine a world where small amounts of shoplifting become somewhat acceptable because every single shop is part of some corp, and every single corp in the biz is hostile by default.
Might be a good idea to get a cheap secondary Android phone to avoid having to pay the iPhone ecommerce/digital tax that companies like Uber will upcharge you for.
aside from everything else this seems ripe for abuse of people with cognitive disabilities
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Is it clear that this will not go in a direction that actually pushes back on wealth inequality?
It seems distasteful on the surface of course but could it be macroeconomically a good thing?
Obviously the fatal flaw is that capitalists are running it for their own gain but logically how would it play out?
I think you answered your own question.
This is like the ultimate version of going back 1000+ years economically and socially. Where a merchant would size up how desperate or rich they thought you were and charged you based on that rather than a reasonable price.
It wastes the time of the poor whom must be willing to walk away without anything when they can "afford it" and further deepens the problems when you are desperate.
Except now they can also spy on you 24x7 and buy information from other spys while they make their decisions and have 100% information asymmetry. Now they also HAVE to charge you more to make back the money they spend spying on you rather than just running a normal business.
You already answered your own question though. It is the peak of exploiting power wealth disparity, there is zero chance of it being used beneficially.