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Response to Comments: /Econ_Articles/newecon.htm

from George Colpitts (gcolpitt@us.oracle.com)
The page seems to imply that increased data on customers will lead to price gouging of relatively wealthy customers. I don't see how a company could successfully execute this strategy in the face of competition from other sellers

The page states: "CDNow may use this information ...to fine tune its prices to charge Alice all that her purse will bear..."

True, but how does that change the conclusion of the previous paragraph? " ... filter can be linked to a shop- bot. Once Alice has decided that she will try On Being Blue she can find out who will sell it to her at the best price"

Any company who tries the strategy of the second paragraph will lose all its business to one who never ups its prices in response to knowledge of the customer (assuming the customer always uses a ShopBot.)

The other possibility is that sellers form cartels and agree on prices for given income levels but I imagine there would soon be laws against this which would be easy to enforce.

There's always the possibility that I missed some crtical counter argument in this very thought provoking article... Contributed by George Colpitts (gcolpitt@us.oracle.com) on July 25, 1999.

(posted 8729 days ago)

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