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Saturday, December 1, 2012

Wait for It. . . .

Online retailers have taken to changing prices frequently--perhaps, hourly--because why should airline passengers have all the fun of finding out they paid twice as much as someone who bought the same product five minutes after they did?

An article in today's Times reports on this practice, adopted by Wal-Mart, Target, Amazon, and other retailers.  Companies monitor each others' prices and then immediately adjust their own to undercut their competitors, sometimes by as little as two cents.  Obviously, some consumers reap significant benefits--to the extent that saving two cents on "Mario Kart" can be considered "significant"--but retailers may face a backlash from those customers irked at being gouged--to the extent that charging an extra two cents on "Mario Kart" can be considered "gouging."

Couldn't this seriously backfire on the retailers?  Once buyers get wind of this practice--i.e., now--won't they start trying to game the system?  Right now, these stores are just competing for the sake of being able to say that they provide the lowest price.  But if I'm in the market for a Bodum wok--whatever that is--and I know retailers are just going to keep lowering the price--why wouldn't I just sit back and wait?

People may not be able to do that with airline tickets: When people have to go somewhere at a certain time, then they pretty much have to accept whatever price is being offered.  But when it comes to plain old retail products?  Why buy now if the price is just going to keep coming down?  If enough people do this, prices will get so low that Wal-Mart'll just start giving stuff away--or even paying people to take it!

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