I wrote this post yesterday, but did not post it. I thought: everyone knows more about pricing than an anthropologist, especially anyone with any economics Then, I thought, well maybe there is something here. You decide.
Pricing used to be a fluid, informal thing. Prices in the market would fluctuate with the time of day, the clothing of the buyer, the stock of the seller or all three. It was kind of value improv.
The fixed price is a relatively new thing, and someday it might a cloudy memory. Someday, our grandchildren will interrogate their elders with questions like, "Is it true that things used to come with a ‘sticker’ and you had to pay what it said?"
We have the technology to "re-price on the fly." But we have yet to put it into practice with any consistency. Old habits die hard. And sometimes they will not die at all. When Douglas Ivester, then the CEO of the Coca-Cola Company proposed that Coke machines might charge more in hot weather, there was a cry of outrage from all quarters. Heartless! Unfeeling! Coke would never exploit me in my hour of need!
But today [Friday], when I was boarding the train at Grand Central, I thought I glimpsed something more plausible. In the present day, the train charges 10 bucks to get from New York to my little town in Connecticut. Everyone pays 10 bucks. Some of the people on my train, to judge by their clothing, watches, and briefcases, are worth great deal of money. These are the kind of people who would happily, easily pay twice that amount. And we might argue that Metro North, cash strapped as it is, does not fulfill its fiduciary responsibility when it does not fully capture the value it is creating for these passengers. (There are several assumptions here and throughout that I have not broken out. If there is something of value here, I am happy to supply.)
Imagine a train with 10 cars, each of with has its own price point. At the front of the train, the price is 30 bucks. At the end, the price is 10 bucks. People array themselves according to what they are prepared to pay. This might be a more lavishly appointed carriage. But I suspect they would pay more merely for a seat and a little personal space. And it will be easy to capture payment. When the doors close, everyone’s debit card will be billed the price of the car.
The train today was absolutely packed. I mean "standing room only" packed. And there are moments during rush hour when Metro North feels like a troop train. Now, we can imagine two opposing tidal forces at work setting prices in the 20 minutes the train sets idling in the station. As the "cheap" end of the train fills, people will react to passenger compression by migrating towards the "pricy" end of the train. But the people at the pricy end by indicating their willingness to pay more for their carriage, and increase the cost of staying there. Eventually, over 20 minutes prices should establish themselves. Yes, even the cheapest seats will become too expensive for some people to bear and they will have to get off the train and wait for one they can afford. At the end of the day, the trains leave the station every 30 minutes, so this is not an impossible hardship. If someone really needs to travel, they will, up to a certain limit, pay more.
In the longer term, I guess the train will have a digital display in each car. It will show the price of each car in the train, and historical average for that car. Otherwise, a trip home to Connecticut turns into a game of "musical chairs."
Getting to the station, that’s another matter. And here, as I stood on Park Avenue watching cabs rocket pass me, I thought, this is where dynamic pricing really makes sense. I should have a card that signals how much I am willing to pay. If my card glows red, I am prepared to pay a meter times 5. If orange, the fare times 4, and so on. If I merely have my hand up, well good luck. It is easy enough to say, but this is unjust, that the rich will commandeer an even thicker share of our resources. And this is true. But it is also true that the taxi driver will now capture more of the value he creates, and this seems entirely fair.
The fact of the matter is that we have fixed pricing because variable pricing was too expensive to manage. Now that the technology is in place, it can only be a matter of time. Economists are much better at thinking of the effects of pricing, and how consumers react to one another’s behavior in the marketplace. It’s the tidal thing that got my attention, and this is the kind of thing Simmel thought about, and it might here that the anthropologist can help out. (Let’s see what jens says.)