Taking this further, if big data can eradicate the consumer surplus, then maybe big data could make price controls more feasible. Maybe big data actually could make a command economy kinda work.
Yep, but ironically it would destroy even more of their surplus, so, at least for now, they're still benefiting.
But also, why shouldn't surplus be destroyed? You don't see people complaining when business surplus is destroyed, and it is because it benefits one party (ours) over the other (theirs), it's simply hypocrisy to think so. For a truly efficient market, surplus on either side should not exist.
No one who is excluded from affording a service due to dynamic pricing going higher than their budget is "benefiting".
I'm having trouble interpreting the boundaries between individuals and groups here in your comment, the language seems to freely and fluidly move between referring to one or the other.
> No one who is excluded from affording a service due to dynamic pricing going higher than their budget is "benefiting".
If everyone cannot afford a service, then that means there is limited supply. Any option other than increasing the simply simple favors one party over another for some reason. For example, if price is kept lower than the highest bidder, then it favors whoever was first (which is unfair too). Or you can do a lottery system, which is “fair”, but not necessarily desirable for a society of every limited service is distributed via lottery and hence removing all incentive for competition.
What is your angle, why are you so adamant to defend this behavior?
> than increasing the simply simple favors one party over another for some reason
This comment chain is about dynamic pricing, which does not necessarily involve third parties (assuming you mean scalpers).
> That happens anyway in a market
What happens anyway? Price discovery? Dynamic pricing allows for better price discovery, that is obvious. Whether it is done by sellers or resellers is irrelevant.
Obviously, different businesses have different mechanics, so the cost of that price discovery may not be worth the inconvenience. For example, a restaurant might want to eliminate scalpers so they can require IDs, but still increase their price with every 20% of capacity they sell.
You'll have to clarify your definition of "discovery". Your attempt to keep it vague is suspicious to say the least.
What dynamic pricing actually does is define and enforce pricing according to unilaterally controlled procedural structures. It is basically a capture of the pricing mechanism. Price discovery already happens in the market as the result of people buying and selling things, this is what's already obvious and is understood from Finance 101 by literally everyone.
Traditionally, how price discovery occurs in goods and services (excepting speculation) is 1) market research and 2) adjusting offered prices in cases of massive recognized disparity between supply and demand to maximize the revenue. As an example of 2, if a restaurant wants to start charging for reservations they first set a price, eg $20, and if they book solid they raise the price after a couple weeks or if they can't get any revenue from this they lower the price. That's the extent of "dynamics" that are necessary here.
You don't need to create some additional service that adjusts these things on the fly, first there is no value for the manager who's already watching and synthesizing this activity as part of their understanding of the operations, and also, it costs more for everyone involved compared to the baseline in order to, what, create one job in the economy?
A seller cannot “enforce” any price, buyers have to choose to buy at a price. That is the price discovery.
Price discovery already happens in the market as the result of people buying and selling things, this is what's already obvious and is understood from Finance 101 by literally everyone.
Correct.
> You don't need to create some additional service that adjusts these things on the fly, first there is no value for the manager who's already watching and synthesizing this activity as part of their understanding of the operations, and also, it costs more for everyone involved compared to the baseline in order to, what, create one job in the economy?
With computers, this is not even a job. Lots of businesses like airlines and hotels already use programs that use data from previous years’ trends as well as searches and accrued reservations statistics to forecast demand and constantly update the price.
As I wrote in my previous comment, a simple program can raise prices as supply decreases, a slightly more advanced one can keep track of the pace of reservations and reduce prices if the pace drops, or if it gets too close to the expiration date for an expiring good.
In the case of a single restaurant like here, I don't see a huge issue though.
Capitalism is a tool, not a law of nature. Perhaps we quite simply do not want to eliminate all surplus, because we like the result of a system with surplus.
You need only look at the difference between catering/decor for a wedding and catering/decor for any other event to see how much wealth extraction... how much poorer we would all be, if we lose the consumer surplus.
That is almost always the case anyway. Things are priced at the point that one would pay. To lament that on behalf of the consumer and not of the business is hypocritical, or more concretely, self-interested, as of course we all are.
> how much poorer we would all be, if we lose the consumer surplus.
To summarize my point, imagine how richer we would all be if we didn't have to pay anything at all. Unfortunately, that is a false world; production depends on consumers paying what they can and businesses charging what they must.
No, things are priced at the point that the market, as a whole, is willing to pay.
Most purchases you make don't start with the merchant checking how much money you have in your savings account.
>That is almost always the case anyway. Things are priced at the point that one would pay.
No... not at all. When you need to fly home for a funeral of a close friend, suddenly plane tickets cost $10,000 for you and only you. Your neighbor could get the same flight for $200, but would not be allowed to transfer the ticket to you, because, well, them's the rules in a no-consumer-surplus world.
The vast, vast, vast majority of the time, most people are paying far less than the would pay for things if the companies they bought them from could use dynamic pricing. This is what the consumer surplus is, and is why markets generally worth for both consumer and seller.
No? How can the neighbor get a different deal than one you are looking for in the case of plane tickets? It's not like the airline knows that you are flying for a funeral. Even if they did, as you mention in a non-surplus world, well, yeah, that's how markets work, people have different needs and pay for that privilege. There are business and first class tickets for a reason, as well as prices being more expensive during holidays and summers. Of all of the examples, you chose one of the worst as flight prices are inherently dynamic.
This is literally how dynamic pricing works, and it happens all the time.
>It's not like the airline knows that you are flying for a funeral.
Yes, they could. A company armed with the biggest of big data could scrape that information fairly trivially. This is my entire point. The more companies know about us, they more they can use dynamic pricing to extract the highest price we'd probably be willing to pay... personally.
>There are business and first class tickets for a reason, as well as prices being more expensive during holidays and summers.
These are different products. Dynamic pricing is different pricing for the exact same product depending on the who the customer is... typically their demographics data.
The reason why less-well-off folks are more likely to support a command economy is exactly because they are at the bottom of the demand curve, thus, receive almost no consumer surplus ever… it’s like they have dynamic pricing for almost every item they buy.
It big data is allowed to defeat the consumer surplus, don’t be surprised when the political winds quickly move toward price controls.