Monday, December 24, 2012

Price Discrimination, Surprise, Stealth Assassination

Ever get the feeling you're being ripped off, even when you know you're not being ripped off?

Every so often, a popular online video game service offers deep discounts on popular titles. It's usually a great opportunity to grab some of the year's sleeper hits or games that were just a little bit too expensive the first time round. Among this year's offerings, there was a particular game with a stealth assassination mechanic set in a steampunk-inspired world. I had been putting off buying it in favor of some of the year's other, more compelling titles, including a run-and-gun, loot heavy FPS and a space opera cover-based shooter. Still, given the right price, I could justify picking it up as a Christmas present to myself.

So that's just what I did. I'd had my eye out for a sale, and when the price dropped from $60 to $45, I grabbed it lickety-split (there's an idiom not seen much these days--I wonder why it fell out of fashion). Well, Christmas season and all, what to my wondering eyes did appear the very next day? The retailer had deepened the discount by another 25%. The game is selling for $30 at the time I type this.

Imagine my mental anguish. Here I am, squire to Sir Munger in the Kingdom of Euvoluntaria, defender of the morality of voluntary trade and I'm all bent out of shape because I learned that if I'd have waited a day, I could have saved another 15 bucks? Come on.

Look, at the time I made my purchase, I did so with all the knowledge I had available to me. I felt I was getting positive consumer surplus. I had no way of knowing the price would be dropped the next day. In econ jargon, the future, unobservable market is irrelevant at the time of purchase. The transaction was euvoluntary when I made it.

Did it suddenly cease to be euvoluntary the following day? If so, I presume it's because of the regret condition? If so, which cell of my regret matrix would it be in? High search costs and high information asymmetry? If you agree with me that this is the bad box to be in, do you think it would be appropriate for government agents to interfere with the terms of the sale?

I will offer this: very often in brick and mortar stores, if a customer shows up ex post with a coupon and a valid receipt, they can claim an adjustment. Bed Bath and Beyond does this, at least. I'm not sure if I can haggle down the purchase price of my game another 15 bucks, nor am I sure if it's worth the time and hassle, but boy-howdy, despite my economics training and my sensitivity to the principles of euvoluntary exchange, I sure am smarting over this. It's kind of soured my enthusiasm for the game itself, which is an innocent bystander in all this.

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Do you have suggestions on where we could find more examples of this phenomenon?