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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 -
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.
I think this is right, and I think the usual justification for why it would be beneficial in increasing output is often related to situations with significant fixed costs and small marginal costs. Buying a plane/operating a flight has significant fixed costs and low marginal costs. Another standard example is a drug company selling a pill in Africa for a tenth of the price they sell it for in America. Drug development has high fixed costs, while production of the pills often has low marginal costs. The key question is, "Would not being able to price discriminate lead to market exit?" In the drug case, if a company couldn't price discriminate between America/Africa (i.e., they had to choose one price everywhere), they're simply not going to sell drugs in Africa. They're going to exit the market. If an airline can't price discriminate at all, then some routes are going to become unprofitable, and they're just not going to offer the flights (and not buy the aircraft to fly the routes). I think this is essentially your idea that they're willing to sell African pills/cheap flights conditional on being able to price discriminate with other transactions. But in both of these cases, I think it's important to note that the price they're willing to give to the "poorer" folks is still above the marginal cost of production. This is obviously true, because otherwise they wouldn't sell a seat to a poorer person or a pill to an African, even with price discrimination.
A couple other salient differences between these examples are 1) monopoly power, and 2) the nature of the price discrimination. On (1), the drug example really only applies to drugs that are patented (and thus, the producers have monopoly power). For example, some countries don't respect patents of US drug companies, and those consumers get generic pills at the (low) marginal cost of production. Once a regular drug goes off-patent, no one really argues for the benefit of price discrimination, because everyone ends up enjoying paying the (low) marginal cost of production! Both in the US and Africa! (Remember, both sets of consumers were paying above the marginal cost of production during the period of monopoly + price discrimination.) The point of difference here is that while airlines have some significant regulatory and other barriers to entry, the market for air travel is much more competitive than that of a patented drug. Part of the question really boils down to how much "cartel-like" control one actually thinks universities/hospitals/whatever actually have. (We could probably argue about this another time; is a pretty rich conversation.)
Concerning (2), I think there is a significant difference in the nature of the price discrimination. Drugs in US/Africa is in a meaningful sense, I think, targeted at general income patterns by regional area. That is short of the very individualized income data that universities/hospitals are able to use. The price discrimination will be a little "less perfect". Moreover, I think that there is a conceptual difference between a company simply being able to look at incomes (whether abstracted over a region or individualized) as opposed to traditional means of price discrimination. Like I mentioned in the OP, all companies want to price discriminate. They want to know incomes. They want to know everything that is going to correlate with willingness-to-pay. But usually, they have to fall back on some other sort of weak correlate. "Vacation travelers tend to book further in advance than business travelers, and the latter tend to have higher willingness-to-pay." "Retirees are more able to view a 2pm matinee at the theater on a week day, and they tend to have lower willingness-to-pay." It may in some sense be correlated with income, but they're actually targeting something else. I also think it's meaningful if the method involved includes actually giving people a different product. Sure, selling a business class ticket for $2k may help make it profitable to run a flight that also includes some $100 seats, but they have to at least, like, try to make that business class seat better in some way. Some incentive for the person to choose to pay $2k rather than just, "Whelp, we magically know your income, so you're gonna have to pay more for the same thing, because fuck you, that's why."
Bringing it back to universities (maybe I'll do healthcare another day), I think they are remarkably more cartel-like than most people understand. They control the accreditation boards that determine who is allowed to sell education. They control processes that require universities to "show a need" for opening up a new program even within an existing university (at least sometimes)! They went knives out in regulatory processes against for-profit colleges, MOOCs, etc. (notwithstanding other legitimate concerns that may exist with those things). You should hear the stories of various tech people/billionaires/etc. who have tried to go after the academia cartel. They give up, because the cartel is stronger than you think. We've bolstered it by subsidizing demand and restricting supply. That's the first problem. Then, I don't think there's any real charge that they will exit the market if they can't price discriminate. While their marginal costs are pretty low, their fixed costs don't really correlate with market exit in the same way that say, not buying a plane to fly a route or not bringing a drug to market does. They have no natural analog to simply not selling drugs in Africa if they're unable to price discriminate. And finally, they've always been able to "price discriminate" by offering a different product. Business class seats are like living in the fancy new dorm building. I don't know that anyone really cares about it that much. Those consumers are genuinely getting additional consumer surplus out of the deal. It is specifically the, "We've magic'ed (by force of government) into existence a new way to just take the surplus from you, not by giving you something else you want or by providing more things to more people, but because we vaguely threatened 'poor people' enough that the gov't now tells us how much money you make," that is a problem.
No one would accept this in any other industry that hasn't already been mammothly screwed up. No one thinks that when you go to the grocery store, or go to buy a TV, a refrigerator, or car, or anything else, that you should first have to just give them all your financial information so that they can tailor your price. Everyone realizes that if the starting point is one of those regular, well-functioning, competitive markets, there would be no benefit to such a thing; it would be a pure transfer of surplus from consumers to producers. Everyone realizes that apples/TVs/refrigerators/cars are already sold at the marginal cost of production, and that adding income-based price discrimination isn't going to magically make producers sell them below the marginal cost of production to poor people. It's only after we have completely screwed up a market that this starts even being a thinkable proposition.
Actually, for cars, they kinda do that. Especially for used cars, I routinely got asked "how much you can afford to pay?", for which I usually answered "yeah, right, nice try" but in polite form. In other markets, it's less pronounced - e.g. there are often brands that function on substance about the same as another brand (and often are owned by the same company and literally are manufactured in the same place) but add a little bit of polish and a lot of marketing, and charge much higher price, in order to extract surplus from customers that are less price-sensitive. They don't ask for your income level, they just price and market it so the people of certain class - and thus, presumably, income level - would be attracted to it.
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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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