Price discrimination sounds terrible, but it is ubiquitous in practice, in the form of coupons, senior discounts, and early bird specials. For online shoppers, similar forms of price discrimination are widespread, and they likely are perfectly legal. However, because they are not transparent, they raise some ethical questions.

In a recent study, researchers conducted identical searches for products on 16 retail and travel websites. Some searches were conducted on mobile devices, others on regular personal computers, and still others on personal computers that had been cleared of all cookies and search histories. Perhaps not surprisingly, the researchers found a wealth of varied prices on at least 9 of the sites, as well as differences in the product and service recommendations. In some cases, the prices varied by hundreds of dollars.

For example, both Home Depot and Travelocity listed different prices when the search came from a mobile device versus a personal computer. Some travel sites offered discounts to “members,” whereas others listed different hotels on top of recommendation lists, depending on the cookies on the user’s computer.

The lack of transparency online is compounded because many sites allow the algorithms they use to determine the price to change frequently, depending on factors that remain hidden to consumers. That is, “In the real world, there are coupons and loyalty cards, and people are fine with that. Here [online], there’s a transparency problem. The algorithms change regularly, so you don’t know if other people are getting the same results.”

Still, the results are reassuring in a way: The researchers found little evidence of unethical efforts to discriminate against consumers. It isn’t as if online retailers are twirling their mustaches, plotting crimes against their users. Instead, they appear happy to keep shoppers in the dark, uncertain of whether they really have gotten the best price or the right hotel recommendation.

Discussion Question

Why might companies charge different prices to consumers who visit their sites using a PC versus a mobile device?

 

Source: Tom Ryan, Retail Wire, October 27, 2014