

Priced To Go - m0th87
http://www.newyorker.com/talk/financial/2009/11/09/091109ta_talk_surowiecki

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chops
_Consumers view these guarantees as conducive to lower prices. But in fact
offering a price-matching guarantee should make it less likely that
competitors will slash prices, since they know that any cuts they make will
immediately be matched. It’s the retail version of the doomsday machine._

Fascinating read. This part in particular caught my attention. Interesting
that price matching guarantees keep prices higher by dissuading competitors
from slashing prices. I had never considered that. Hell, I've always been one
of those naive consumers who thought price-matching generally meant lower-
prices.

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lliiffee
I think he is wrong about price matching. You can _very_ often find items at
stores with price-match guarantees at prices higher than elsewhere. If you are
willing to price-match and spend a relatively large amount of time, then you
can get the item at... that _same_ price you would have paid somewhere else.
Surprisingly enough, consumers rarely take advantage of this! Price-match
guarantees are a cheap way to mislead consumers that your prices are lower,
not a way of negotiating with competitors. If stores wanted to signal each
other, as he claims, they would _automatically_ match prices. They don't.

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shalmanese
Price matching serves two purposes. One is it's an effective market
segmentation tool (<http://en.wikipedia.org/wiki/Market_segment>) as it allows
people to trade effort for discounts.

The second is that it does not dissuade price _differences_ but does dissuade
price _wars_. As long as prices remain stable, differences are not much of a
worry. It's when they start reacting to each other that retailers stand to
lose a lot of money.

~~~
lliiffee
> it allows people to trade effort for discounts.

It doesn't really do that. Instead of going through the hassle (and it _is_ a
hassle) of price matching at store A, I can just buy the item at store B at
the advertised price. The store offering price matching _knows_ I will do
that. They don't care because the guarantee sounds good to the consumer too
busy to comparison shop. Unlike, say, coupons, price matching guarantees are
not meant to be taken advantage of.

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CapitalistCartr
Ten books by Amazon and Walmart, considering their size, is more a loss-leader
than price war. The publicity alone, as mentioned in the article, is worth
more than any losses. After the dust has settled, both their revenue and
profit intakes will likely be up.

~~~
cookingrobot
Prices for books move around more than I would have thought. I can understand
the Amazon price drop on Stephen King as mention in the article because it was
an analyzed move to compete with Wallmart. (price history graph:
<http://www.shopobot.com/under-the-dome-a-novel-hardcover>)

But why do some book prices swing wildly up and down day to day? ex.
<http://www.shopobot.com/where-the-wild-things-are-hardcover> Do they
dynamically price based on sales that day? Anyone know how Amazon's pricing
system works?

