In the beginning there were no fixed prices. Every
transaction involved a negotiation between buyer and seller. Then in
1861, as Guardian reporter Tim Adams informs
us, Philadelphia retailer John Wanamaker introduced price tags, along
with the slogan, “If everyone was equal before God, then everyone would
be equal before price.” Wanamaker’s stated intent was to establish “new,
fair and most agreeable relations between the buyer and the seller.”
the next 150 years, fixed pricing became the norm. Companies determined
prices either by pegging them to those of their competitors or by
calculating the cost of a good or service and adding a profit, with an
occasional white sale or going-out-of-business sale, or discounted
In the 1990s came the internet, and in
the 2000s, online shopping and smartphones. Prices could be changed
remotely and frequently. Initially businesses changed their prices
largely to take advantage of a shortage of supply (e.g. Uber with its
surge pricing) or an increased demand (airlines, in essence, auctioning
off tickets to last-minute customers).
Big data emerged
and with it the ability for businesses to know their customers in a most
intimate and detailed fashion. Initially, sophisticated algorithms
allowed businesses to individualize ads. Now as they’ve gathered even
more of our personal data they’ve begun to individualize prices. As
Adams notes, the travel site Orbitz calculated that Apple Mac users
would pay 20-30 percent more for hotel rooms than users of other brands
of computer and adjusted its pricing accordingly. Jerry Useem in the
Atlantic maintains the price of Google’s headphones may depend on how budget-conscious our web buying history reveals.
price tags may soon allow dynamic pricing in brick and mortar stores.
Such tags are already in stores in France and Germany and parts of
The Guardian reports that B&Q, the
largest home improvement and garden center retailer in the UK and
Ireland, has tested electronic price tags that could change the price of
an item, based on which customer is looking at it, something it can
derive from the Wi-Fi connection to the customer’s mobile phone. Not yet
in stores, but that may be just a matter of time.
pricing strives to maximize the seller’s profit by raising the average
price he receives. Economists believe that is simply good business
tactics. The rest of us remain unconvinced.