Thursday, October 15, 2009

Online pricing practices to be regulated?

The British Office of Fair Trading (OFT) is starting an investigation of online pricing practices. [BBC News, 15 October 2009]

Typical Offenders
Drip pricing Consumers only see an element of the price upfront and end up paying much more due to optional or compulsory extras Airlines, car hire firms and insurance companies
Time-limited offers For example, sales that finish at the end of the month or last for one day only. Carpet stores and furniture sellers
Baiting sales A company advertises discounts to attract visitors whilst having few items at that price on sale
Reference prices Artificially inflating the pre-sale price of an item in order to make the discount look more attractive.  Companies offering cruises or selling furniture. Supermarkets
Complex pricing It is difficult for a consumer to assess an individual price, such as with three-for-two offers and 'free' add-ons.
Mobile phone companies, supermarkets and computer stores
Customized pricing Prices are individually tailored using information collected about a consumer's internet use
Price comparison  websites
There may be some hidden financial ties or other collusion between an apparently independent comparison site and the suppliers whose prices they are comparing

I have talked about some of these pricing schemes and scams before, in particular complexity-based pricing. I've also talked about ways (such as the infamous Ghetto Latte) whereby consumers can get a better deal than the service provider intended. All this kind of thing results in chronic distrust between service provider and service user, and excessive transaction costs. Might seem like a classic argument for regulatory intervention, if we could really believe that would make the situation fairer. What do you think?

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