This is the Quality Contributions Roundup. It showcases interesting and well-written comments and posts from the period covered. If you want to get an idea of what this community is about or how we want you to participate, look no further (except the rules maybe--those might be important too).
As a reminder, you can nominate Quality Contributions by hitting the report button and selecting the "Actually A Quality Contribution!" option. Additionally, links to all of the roundups can be found in the wiki of /r/theThread which can be found here. For a list of other great community content, see here.
These are mostly chronologically ordered, but I have in some cases tried to cluster comments by topic so if there is something you are looking for (or trying to avoid), this might be helpful. Here we go:
Quality Contributions to the Main Motte
Contributions for the week of April 3, 2023
Recognition Diplomacy
Contributions for the week of April 10, 2023
Transitive Reasoning
Contributions for the week of April 17, 2023
Identity Politics
Contributions for the week of April 24, 2023
- "What is going in Sudan is a practical demonstration that being a global power does not mean that everything going on in the world is secretly about you."
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Notes -
Holy crap. That @ControlsFreak post on personalized pricing just blew my mind. I hadn't seen it when it was first posted, but I'm very glad that I did because it just changed my perspective on the whole financial assistance thing.
Thanks for such positive feedback! It's really nice to hear that it resonated with people; when I first wrote it, I got no responses, so I actually figured that it had just fallen flat with the audience.
If you look, it got more upvotes than the post it was responding to, so most likely people who saw with it agreed but didn't have anything of their own to add in response.
I don't know about everyone else, but I don't dig into the responses on every top level post, only ones I find interesting. And often miss responses if they happen after I've already read the top level post, as I usually don't go back and find new responses. So that's why I missed this one, because I do read every top level post, but I didn't care about this one.
I also more frequently respond to people I disagree with than people I agree with, because people I agree with already said half of my thoughts. So that's a bias towards non-response which was probably relevant here given how insightful your post was.
So I guess as a followup here:
Is there a solution? I think we'd both agree that this scenario is generally bad for society if businesses capture all of the gains, because that screws over the customers. Economic surplus is created by the economic trade between producers and customers, and thus both are partially responsible for it, so both deserve some of the surplus. Not necessarily exactly 50-50, but some reasonable fraction. So if producers capture 99% of surplus by near-perfect price discrimination and leave just a tiny scrap of surplus to customers to push them over the edge of indifference, then customers are being deprived of surplus that is rightfully theirs.
On the other hand, price discrimination is often more economically efficient than a flat rate.
Suppose we have 10 consumers who value a good with utility 1,2,3...10. And a producer who can produce the good with cost 2.
1: With a flat price for all customers, the producer maximizes profits by setting their price at 7 - ε, in which case they sell to 4 consumers. The total surplus is 26, of which 20 - 4ε is captured by the producer and 6+4ε is captured by consumers.
2: With perfect knowledge and price discrimination, the producer sells to each person with value greater than 2, at a cost ε less than their valuation. They sell to 8 consumers, the total surplus is 36, 36-8ε is captured by the producer, and 8ε is captured by consumers.
So even though the consumers are better off in the flat price scenario, the total economic surplus created with price discrimination is higher. If we could somehow detect these scenarios and redistribute the surplus back to the consumers in a way that didn't distort the economic incentives of the producers or consumers, the price discrimination scenario is better. I will note that there's also a third scenario with comparable surplus:
3: If the producer is altruistic/non-profit, they can set a flat price equal to 2+ε, they sell to 8 people, the total surplus is 36, but now 36-8ε is captured by consumers and 8ε is captured by the producer.
So if the balance of power tips too far in either direction, one of the groups will snatch all of the surplus. I think a fair equilibrium would maximize surplus while splitting the distribution somewhere in the middle. Not necessarily 50-50, but somewhere in the ballpark. But how do you do that here? Taxes and explicit forms of redistribution usually distort incentives, but maybe there's something clever I'm not aware of?
I know you're probably speaking casually, but customers do not have a "right" to anything here (other than a right to the product or service they paid for). We can say that we prefer it when gains from trade are divided as evenly as possible, but there is nothing morally wrong about selling something for a price that a customer is willing to freely pay.
And as we see in your own example, total surplus can be greater when price discriminating. In fact, we often see price discrimination as laudable in medical context: if a doctor charges clients based on what they can afford to pay, we see that as a good thing. Perfect price discrimination is just charging people exactly what they can afford to pay: that is, the most they'd be willing to pay for the good or service you're providing.
This means poor people benefit greatly from price discrimination: they get goods or services they want at a price they are willing to pay when otherwise they wouldn't be able to afford it.
EDIT: One further thought. If we had to choose between producer and consumer getting the majority of the surplus, favoring the producer has the benefit of incentivizing more people to become producers. Which benefits everyone.
No, the entire point is that they don't. They benefit a tiny tiny bit from price discrimination. If the maximum someone is willing to pay for a product is $10, and it costs $9.99, then they benefit by $0.01. That is, they are barely coming off ahead at all, almost all of the benefit from that product they gain was lost to them in the $9.99 they spent and given to the producer. You can sell five times as much product to five times as many poor people and create five times as much benefit, but none of them are gaining much benefit at all because the products are just barely worth it.
If you have a crippling leg injury, and a doctor cures it but charges so much money that the debt cripples your life 99% as much as the leg injury did, you have benefited... but just barely.
From the producer's standpoint, this is great. Tons of value is being created by the increased number of exchanges. Lots of people are incentivized to become producers... which benefits the people who are in a position to become producers and able to (assuming the market isn't an oligopoly that crushes small competitors). And the increased trade does benefit customers... by like 1% because that's how much of this increased surplus they get to keep.
If the only two options are perfect price discrimination or unserved customers, then the price discrimination scenario is technically better for those particular customers. But my goal is to find a third option that's better, because the price discrimination scenario isn't very good for anyone except producers.
If I may--I think the disconnect here is one the difference between poor people benefiting from specific cases of price discrimination, and poor people benefiting from the overall existence of price discrimination.
A producer who is willing to let a good go for as little as $10, assuming a single transaction ever, is different than a producer who is willing to let a good go for as little as $10, conditional upon someone else paying $20 for the same good, or for some other good. My understanding is that airline pricing often functions in approximately this way. If you have a ten-seat airplane, and a flight costs you $10,000 to run, then your break-even point is $1,000 per seat. But if there are five people willing to pay up to $2,000 per ticket, and five people willing to pay up to $200 per ticket, and no other possible customers, then your ability to price discriminate means you get to make a $1,000 profit beyond your break-even, and five people get to fly who would not have gotten to fly at a flat, evenly-distributed price. The "poor people" in this scenario got a benefit, even though the airline could arguably have accepted $100, or $10, for those other five seats.
I don't think every case of price discrimination looks like this; I'm not even sure most cases look like this. But it does seem to me that "willing to accept an $X transaction conditional upon other transactions" is an important part of how to think about price discrimination.
Sure. I wholeheartedly agree that in some instances price discrimination is better for both consumers and producers simultaneously. Especially when costs are nonlinear as in your example.
But in other cases it's bad for consumers (as a whole, every case will have a few specific individuals who benefits at the lowest end of the curve who wouldn't be served without price discrimination, but the average consumer ends up worse off)
And producers with perfect knowledge have no incentive to pick and choose only to use it when it benefits customers. And I don't think it's necessary to demand such a strong burden on them. If scenario A has $500 consumer surplus and $500 producer surplus, while scenario B has $400 consumer surplus and $1000 producer surplus, it doesn't seem unreasonable to allow them to do scenario B without getting upset at them. But if scenario C has $1 consumer surplus and $2000 producer surplus... I feel like something has gone wrong. Like, it's economically efficient on a global scale, the total surplus is higher. But it violates intuitive notions of "fairness" in ways that lead to poverty and discontent. Note that utility is nonlinear with respect to money. A thousand people with $10,000 each will be more happy/healthy/fulfilled/content/secure on average than 999 broke people and 1 person with $10 million.
Maybe if we could figure out a way to losslessly tax them and redistribute some of the profits back to consumers this would be fine? But I'm skeptical of "lossless taxation" on producer surplus being possible. I feel like a more organic market solution involving competition and balanced bargaining power would be better, where prices are set in between customer's values and producer costs such that both could extract nontrivial fractions of the surplus.
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