Yes, this is a good example. I think a real gung-ho capitalist would say that these people are doing a public service, and are just engaging in the same sorts of price discrimination that conventional businesses do all the time.
In a way, a bookstore is doing the same thing. An author’s book is sold as a preorder for lower than the later retail rate. The bookstore purchases a stockpile of copies at a low price. Then, when the release date rolls around, they charge a higher rate than what they paid. If their customers had only known about the preorder in advance, they too could have snagged it at a lower price. Now, they’re forced to deal with the book seller.
I also know somebody who runs a business where she buys cheap clothes on Ebay, models them, and then resells them on Instagram for a steep markup. That’s retail scalping—with a small value-added service, to be sure—but it doesn’t feel repugnant to anybody who hears about it. It’s just a step above dumpster-diving. You’re looking through a bunch of things people are giving away for a low (or zero) price, picking out the few that are actually nice enough to warrant a higher price, and then charging a premium for your service.
It would, of course, be nice to find such opportunities with the additional requirement that they’re not repugnant. But in principle, yes, as long as the deal isn’t fraudulent, anything goes. The question is whether there’s money to be made, not whether there’s nice-looking money to be made.
But for someone who’s interested in the latter question, they just have a harder problem to solve. The same thoughts above might help them to find solutions.
How does price discrimination serve the public? I got the impression it’s the sort of drawback of markets that gets regulated away when it gets pronounced enough, like network effects.
I think there’s a good chance my answer might change if I thought about this more. But the underlying thought is that price discrimination gives consumers more choices.
Coupons are a real-world example of PD. Without them, consumers have two choices:
Consume at a higher price.
Forego consumption entirely.
With coupons, consumers have a third choice:
3. Consume at a lower price, in exchange for the fuss of keeping track of coupons.
More choice is good. Price discrimination allows people who’d otherwise be priced out of consumption to get more of what they want.
The sourcing-cheap-clothes-on-eBay method doesn’t sound like ‘small value-add’ in that evidently people are prepared to pay quite a lot extra for her to do this. I.e. to save them the trouble of trawling through pages of crap on eBay; but also presumably saving them the risk that stuff sold on eBay (with crappy photos etc.) is often crummy, whereas stuff properly modelled (with nice photos) is more likely to be good.
Right. It’s arguably not morally worse than various HFT and dark pool and other fintech moneymaking tricks though. All these involve buying a mispriced commodity (even by a fraction of a cent) and reselling it for it’s true (market value). And the buying/selling opportunities are unavailable to most people, in the same way you can’t retail scalp effectively unless you are using a computer program to do it.
My point is the ‘less morally repugnant but also still as profitable’ hurdle isn’t an easy one to clear since it’s not that morally repugnant.
I’m now realizing that I probably misinterpreted Gerald. I think he means people who set up an e-commerce site selling, say, a dog toy, at a higher price than you’d find on other e-commerce websites. If the customer buys it, the retail scalper orders the toy through the lower-priced page and has it shipped to the customer. If the customer wants to return it, they have the return sent to the original seller, who eats the cost of the return.
Effectively, the retail scalper is exploiting (if not stealing outright) the “free returns” offered by the original seller. This isn’t just about stockpiling, or putting in work to find underpriced goods and sell them for what they’re worth.
Instead, it’s about exploiting people who are bad at comparison shopping, and market norms that enable things like free return policies to exist. It raises prices for the consumer (who might naturally expect that the vendor they’re buying from isn’t a retail scalper), and imposes an hidden risk of extra costs on the seller. Consumers who realize they’ve overpaid for a product might return the version they bought through the retail scalper to the normal e-commerce vendor, and then turn around and buy it right back again from that vendor through the normal e-commerce site.
The best defense of it that I can make is that retail scalpers are adding a sort of “free advertising” for the product. Somehow, they’re identifying consumers who weren’t finding the cheaper prices on the normal e-commerce site, and convincing them to buy the product when they otherwise wouldn’t have. But I’m not compelled by that argument.
For some subset of retail scalpers, they can be seen as taking on the risk of engaging in low-trust e-commerce; I can certainly beat the prices I pay for many of the goods I purchase, but doing so greatly increases my risk profile to, for example, somebody stealing my identity / credit card information.
For others, they provide a kind of availability arbitrage, by providing access to the same goods across multiple websites; I can pick the e-commerce portal I want to use, and trust that retail scalpers will ensure the goods I want to purchase will make it available there.
And for yet others, they are backing up purchases with their own reputation—pretty much every large retail company is reselling goods they purchased from companies in China which a buyer would be dubious about purchasing from; Etsy is full of resellers of Chinese goods in this fashion.
And on the subject of Etsy, there’s also the dubious service of X-laundering; one example being ethical laundering, where a reseller sells goods from companies that people wouldn’t purchase from themselves for ethical reasons; another example being status-good laundering, where a reseller sells goods that people purchase with the plausible misconception that the seller is handcrafting them. In all of these cases, the reseller is performing a service with regard to the original seller, and in some of these cases, the reseller may be performing a service for the end-consumer as well.
There’s a wide variety of defenses for the behavior, basically.
Yes, this is a good example. I think a real gung-ho capitalist would say that these people are doing a public service, and are just engaging in the same sorts of price discrimination that conventional businesses do all the time.
In a way, a bookstore is doing the same thing. An author’s book is sold as a preorder for lower than the later retail rate. The bookstore purchases a stockpile of copies at a low price. Then, when the release date rolls around, they charge a higher rate than what they paid. If their customers had only known about the preorder in advance, they too could have snagged it at a lower price. Now, they’re forced to deal with the book seller.
I also know somebody who runs a business where she buys cheap clothes on Ebay, models them, and then resells them on Instagram for a steep markup. That’s retail scalping—with a small value-added service, to be sure—but it doesn’t feel repugnant to anybody who hears about it. It’s just a step above dumpster-diving. You’re looking through a bunch of things people are giving away for a low (or zero) price, picking out the few that are actually nice enough to warrant a higher price, and then charging a premium for your service.
It would, of course, be nice to find such opportunities with the additional requirement that they’re not repugnant. But in principle, yes, as long as the deal isn’t fraudulent, anything goes. The question is whether there’s money to be made, not whether there’s nice-looking money to be made.
But for someone who’s interested in the latter question, they just have a harder problem to solve. The same thoughts above might help them to find solutions.
How does price discrimination serve the public? I got the impression it’s the sort of drawback of markets that gets regulated away when it gets pronounced enough, like network effects.
I think there’s a good chance my answer might change if I thought about this more. But the underlying thought is that price discrimination gives consumers more choices.
Coupons are a real-world example of PD. Without them, consumers have two choices:
Consume at a higher price.
Forego consumption entirely.
With coupons, consumers have a third choice:
3. Consume at a lower price, in exchange for the fuss of keeping track of coupons.
More choice is good. Price discrimination allows people who’d otherwise be priced out of consumption to get more of what they want.
The sourcing-cheap-clothes-on-eBay method doesn’t sound like ‘small value-add’ in that evidently people are prepared to pay quite a lot extra for her to do this. I.e. to save them the trouble of trawling through pages of crap on eBay; but also presumably saving them the risk that stuff sold on eBay (with crappy photos etc.) is often crummy, whereas stuff properly modelled (with nice photos) is more likely to be good.
Right. It’s arguably not morally worse than various HFT and dark pool and other fintech moneymaking tricks though. All these involve buying a mispriced commodity (even by a fraction of a cent) and reselling it for it’s true (market value). And the buying/selling opportunities are unavailable to most people, in the same way you can’t retail scalp effectively unless you are using a computer program to do it.
My point is the ‘less morally repugnant but also still as profitable’ hurdle isn’t an easy one to clear since it’s not that morally repugnant.
EDIT:
I’m now realizing that I probably misinterpreted Gerald. I think he means people who set up an e-commerce site selling, say, a dog toy, at a higher price than you’d find on other e-commerce websites. If the customer buys it, the retail scalper orders the toy through the lower-priced page and has it shipped to the customer. If the customer wants to return it, they have the return sent to the original seller, who eats the cost of the return.
Effectively, the retail scalper is exploiting (if not stealing outright) the “free returns” offered by the original seller. This isn’t just about stockpiling, or putting in work to find underpriced goods and sell them for what they’re worth.
Instead, it’s about exploiting people who are bad at comparison shopping, and market norms that enable things like free return policies to exist. It raises prices for the consumer (who might naturally expect that the vendor they’re buying from isn’t a retail scalper), and imposes an hidden risk of extra costs on the seller. Consumers who realize they’ve overpaid for a product might return the version they bought through the retail scalper to the normal e-commerce vendor, and then turn around and buy it right back again from that vendor through the normal e-commerce site.
The best defense of it that I can make is that retail scalpers are adding a sort of “free advertising” for the product. Somehow, they’re identifying consumers who weren’t finding the cheaper prices on the normal e-commerce site, and convincing them to buy the product when they otherwise wouldn’t have. But I’m not compelled by that argument.
For some subset of retail scalpers, they can be seen as taking on the risk of engaging in low-trust e-commerce; I can certainly beat the prices I pay for many of the goods I purchase, but doing so greatly increases my risk profile to, for example, somebody stealing my identity / credit card information.
For others, they provide a kind of availability arbitrage, by providing access to the same goods across multiple websites; I can pick the e-commerce portal I want to use, and trust that retail scalpers will ensure the goods I want to purchase will make it available there.
And for yet others, they are backing up purchases with their own reputation—pretty much every large retail company is reselling goods they purchased from companies in China which a buyer would be dubious about purchasing from; Etsy is full of resellers of Chinese goods in this fashion.
And on the subject of Etsy, there’s also the dubious service of X-laundering; one example being ethical laundering, where a reseller sells goods from companies that people wouldn’t purchase from themselves for ethical reasons; another example being status-good laundering, where a reseller sells goods that people purchase with the plausible misconception that the seller is handcrafting them. In all of these cases, the reseller is performing a service with regard to the original seller, and in some of these cases, the reseller may be performing a service for the end-consumer as well.
There’s a wide variety of defenses for the behavior, basically.