Reflect on the Following Excerpt from a Washington Post Article

question 133

Multiple Choice

Reflect on the following excerpt from a Washington Post article about dynamic pricing by online retail giant Amazon.com. Few things stir up a consumer revolt quicker than the notion that someone else is getting a better deal. That's a lesson Amazon.com has just learned. Amazon, the largest and most potent force in e-commerce, was recently revealed to be selling the same DVD movies for different prices to different customers. It was the first major Web test of a strategy called "dynamic pricing," which gauges a shopper's desire, measures his means and then charges accordingly. The Internet was supposed to empower consumers, letting them compare deals with the click of a mouse. But it is also supplying retailers with information about their customers that they never had before, along with the technology to use all this accumulated data. While prices have always varied by geography, local competition and whim, retailers were never able to effectively target individuals until the Web. "Dynamic pricing is the new reality, and it's going to be used by more and more retailers," said Vernon Keenan, a San Francisco Internet consultant. "In the future, what you pay will be determined by where you live and who you are. It's unfair, but that doesn't mean it's not going to happen."
Source: David Streitfeld, "On the Web, Price Tags Blur: What You Pay Could Depend on Who You Are," Washington Post, September 27, 2000, A1.
For the consumer, who might have to pay based on "where you live and who you are," perfect price discrimination may feel unfair because it results in a:

• A) decrease in total welfare.
• B) loss of consumer surplus.
• C) loss of producer surplus.
• D) decrease in deadweight loss.
• E) loss of market efficiency.

---

Definitions:

Fundamental Attribution Error

The inclination to excessively focus on individual traits while disregarding the influence of the context when evaluating the actions of others.

Motivation

The driving force behind an individual's actions, desires, and needs.

Political Conservatives

Individuals who generally prefer to uphold traditional values and are cautious about embracing change or innovation, often emphasizing free enterprise, private ownership, and socially conservative ideas.

Political Liberals

Individuals who typically advocate for social equality, personal freedoms, and governmental interventions to address social inequalities.