Excellent example of price discrimination

Via the Freakonomics blog comes the following picture:

Source.

At first glance this seems weird, they are charging different prices for the same thing!!!  However, as anyone with experience of vending machines and universities knows, these puppies provide a lot of service to students late at night.  In fact, it is typical for sections of the machine to sell out before nightfall.

As we know that the first people to the machine will pay the lower price, we can also say that once the cheap chips sell people will have to pay more.

Now, given that the local tuck shop will be closed by night time we know that the number of substitutes to the vending machine falls at night.  As a result, this pricing system ensures that the owner of the vending machine can charge more for the same chips at night time (assuming of course that the cheaper chips will sell out during the day time when substitutes are available) – when people value them more highly and are willing to pay more.

Excellent stuff.

130 replies
  1. insider
    insider says:

    Sexy should be easy, it’s relationships that are complicated. You went for complicated.

    Anyway, your theory might hold if supply of lower priced ones were restricted to day time sales and bags BO and B2 were the only ones allowed at night. But where;s the evidence!!?? Are students capable of discriminating at that time of night (or day)?

  2. rauparaha
    rauparaha says:

    If it’s a mistake then it’s a very smart mistake! I hope they learn from it and continue to increase total surplus for the good of the nation 🙂

  3. Matt Nolan
    Matt Nolan says:

    @insider

    Not necessarily, as long as there is some sort of capacity constraint we know that this could well be a profit maximising move. If the 0.65c bit was always full, then it would just be weird.

    I wouldn’t say this is a complicated explanation – to be honest I thought of it BEFORE I thought it could be a mistake. Then again, my brain is programmed for sexy economics.

Trackbacks & Pingbacks

  1. […] Freakonomics blog provides another perplexing picture (the last one was discussed here).  This time we have a situation where it costs LESS to buy two of something then to buy just 1.  […]

  2. […] Freakonomics blog provides another perplexing picture (the last one was discussed here).  This time we have a situation where it costs LESS to buy two of something then to buy just 1.  […]

  3. […] TVHE » Excellent example of price discrimination […]

  4. […] TVHE » Excellent example of price discrimination […]

  5. […] TVHE » Excellent example of price discrimination […]

  6. […] TVHE » Excellent example of price discrimination […]

  7. […] TVHE » Excellent example of price discrimination […]

  8. […] TVHE » Excellent example of price discrimination […]

  9. […] TVHE » Excellent example of price discrimination […]

  10. […] TVHE » Excellent example of price discrimination […]

  11. […] TVHE » Excellent example of price discrimination […]

  12. […] TVHE » Excellent example of price discrimination […]

  13. […] TVHE » Excellent example of price discrimination […]

  14. […] TVHE » Excellent example of price discrimination […]

  15. […] TVHE » Excellent example of price discrimination […]

  16. […] TVHE » Excellent example of price discrimination […]

  17. […] TVHE » Excellent example of price discrimination […]

  18. […] TVHE » Excellent example of price discrimination […]

  19. […] TVHE » Excellent example of price discrimination […]

  20. […] TVHE » Excellent example of price discrimination […]

  21. […] TVHE » Excellent example of price discrimination […]

  22. […] TVHE » Excellent example of price discrimination […]

  23. […] TVHE » Excellent example of price discrimination […]

  24. […] TVHE » Excellent example of price discrimination […]

  25. […] TVHE » Excellent example of price discrimination […]

  26. […] TVHE » Excellent example of price discrimination […]

  27. […] TVHE » Excellent example of price discrimination […]

  28. […] TVHE » Excellent example of price discrimination […]

  29. […] TVHE » Excellent example of price discrimination […]

  30. […] TVHE » Excellent example of price discrimination […]

  31. […] TVHE » Excellent example of price discrimination […]

  32. […] TVHE » Excellent example of price discrimination […]

  33. […] TVHE » Excellent example of price discrimination […]

  34. […] TVHE » Excellent example of price discrimination […]

  35. […] TVHE » Excellent example of price discrimination […]

  36. […] TVHE » Excellent example of price discrimination […]

  37. […] TVHE » Excellent example of price discrimination […]

  38. […] TVHE » Excellent example of price discrimination […]

  39. […] TVHE » Excellent example of price discrimination […]

  40. […] TVHE » Excellent example of price discrimination […]

  41. […] TVHE » Excellent example of price discrimination […]

  42. […] TVHE » Excellent example of price discrimination […]

  43. […] TVHE » Excellent e.g. of cost discrimination […]

  44. […] TVHE » Excellent e.g. of cost discrimination […]

  45. […] TVHE » Excellent example of price discrimination […]

  46. […] TVHE » Excellent e.g. of cost discrimination […]

  47. […] TVHE » Excel­lent exam­ple of price discrimination […]

  48. […] TVHE » Excellent example of price discrimination […]

  49. […] TVHE » Excellent example of price discrimination […]

  50. […] TVHE » Excellent example of price discrimination […]

  51. […] TVHE » Excellent example of price discrimination […]

  52. […] TVHE » Excellent example of price discrimination […]

  53. […] TVHE » Excellent example of price discrimination […]

  54. […] TVHE » Excellent example of price discrimination […]

  55. […] TVHE » Excellent example of price discrimination […]

  56. […] TVHE » Excellent example of price discrimination […]

  57. […] TVHE » Excellent example of price discrimination […]

  58. […] TVHE » Excellent example of price discrimination […]

  59. […] TVHE » Excellent example of price discrimination […]

  60. […] TVHE » Excellent example of price discrimination […]

  61. […] TVHE » Excellent example of price discrimination […]

  62. […] TVHE » Excellent example of price discrimination […]

  63. […] TVHE » Excellent example of price discrimination […]

  64. […] TVHE » Excellent example of price discrimination […]

  65. […] TVHE » Excellent example of price discrimination […]

  66. […] TVHE » Excellent example of price discrimination […]

  67. […] TVHE » Excellent example of price discrimination […]

  68. […] TVHE » Excellent example of price discrimination […]

  69. […] TVHE » Excellent example of price discrimination […]

  70. […] TVHE » Excellent example of price discrimination […]

  71. […] TVHE » Excellent example of price discrimination […]

  72. […] TVHE » Excellent example of price discrimination […]

  73. […] TVHE » Excellent example of price discrimination […]

  74. […] TVHE » Excellent example of price discrimination […]

  75. […] TVHE » Excellent example of price discrimination […]

  76. […] TVHE » Excellent example of price discrimination […]

  77. […] TVHE » Excellent example of price discrimination […]

  78. […] TVHE » Excellent example of price discrimination […]

  79. […] TVHE » Excellent example of price discrimination […]

  80. […] TVHE » Excellent example of price discrimination […]

  81. […] TVHE » Excellent example of price discrimination […]

  82. […] TVHE » Excellent example of price discrimination […]

  83. […] TVHE » Excellent example of price discrimination […]

  84. […] TVHE » Excellent example of price discrimination […]

  85. […] TVHE » Excellent example of price discrimination […]

  86. […] TVHE » Excellent example of price discrimination […]

  87. […] TVHE » Excellent example of price discrimination […]

  88. […] TVHE » Excellent example of price discrimination […]

  89. […] TVHE » Excellent example of price discrimination […]

  90. […] TVHE » Excellent example of price discrimination […]

  91. […] TVHE » Excellent example of price discrimination […]

  92. […] TVHE » Excellent example of price discrimination […]

  93. […] TVHE » Excellent example of price discrimination […]

  94. […] Excellent example of price discrimination (The Visible Hand in Economics) […]

  95. […] This post was mentioned on Twitter by Matt Nolan, Eric Crampton. Eric Crampton said: RT @TVHE: Doritos and price discrimination: http://bit.ly/bVNTEa \ nice! […]

  96. […] TVHE » Excellent example of price discrimination […]

  97. […] TVHE » Excellent example of price discrimination […]

  98. […] TVHE » Excellent example of price discrimination […]

  99. […] TVHE » Excellent example of price discrimination […]

  100. […] TVHE » Excellent example of price discrimination […]

  101. […] TVHE » Excellent example of price discrimination […]

  102. […] TVHE » Excellent example of price discrimination […]

  103. […] TVHE » Excellent example of price discrimination […]

  104. […] TVHE » Excellent example of price discrimination […]

  105. […] TVHE » Excellent example of price discrimination […]

  106. […] TVHE » Excellent example of price discrimination […]

  107. […] TVHE » E&#1093&#1089&#1077&#406&#406&#1077&#1495t example &#959f price discrimination […]

  108. […] TVHE » Excellent example of price discrimination […]

  109. […] TVHE » Excellent example of price discrimination […]

  110. […] TVHE » Excellent example of price discrimination […]

  111. […] the rest here:  TVHE » Excellent example of price discrimination It's Not The Band I Hate, It's Their Fans: The Final Post: All …- […]

  112. […] TVHE » Excellent example of price discrimination […]

  113. […] TVHE » Excellent example of price discrimination […]

  114. […] TVHE » Excellent example of price discrimination Excellent free apps – Droid Forum – Verizon Droid & the Motorola …Physical demand for gold is excellent, says expert > Gold News …2008 honda cbr 150 excellent condition low mileageWorld of Warcraft – Level 80 Hack. Works excellent! All new …Bitten by Books » Sonya Bateman Master of None Release Party Live …Excellent new from Google! – Droid Forum – Verizon Droid & the …Staringfrog.com | How to Have Fun in College Without PartyingFun Softball Practice Drills | Fun GamesThe British National Party — Blog — Yardley Loses Excellent CandidateTeachers should make learning fun and enjoyable for their students. View the Contact Powered by Blog […]

  115. […] TVHE » Excellent example of price discrimination […]

  116. […] TVHE » Excellent example of price discrimination […]

Comments are closed.