Price Discrimination: Fish, Eyeglasses, Airfares

In an NBER working paper "A Dynamic Model of Price Discrimination and Inventory Management at the Fulton Fish Market" two Brandeis University economists studied fish-purchasing patterns over 22 weeks and found that white customers usually pay five cents, and sometimes up to 10 cents, more than their Asian counterparts when buying a pound of whiting at the Fulton Fish Market in New York City.

Whenever a buyer approaches a fish stand, a fish dealer’s expert eye scans “his type” and evaluates his price elasticity. As a rule of thumb, Asian customers mean tougher haggling and lower prices; their white counterparts are a quicker sell, yielding higher profits for the vendor.

~Wall Street Journal

A firm engaged in price discrimination faces two practical problems. The first is the problem of distinguishing customers who will buy the good at a high price from those who will not.

One solution is said to be used by optometrists. When the customer asks how much a new pair of glasses will cost, the optometrist replies, "Forty dollars." If the customer does not flinch, the doctor adds "for the lenses." If the customer still does not flinch, he adds, "each."

~David Friedman's Price Theory textbook


Round trip airfares, Detroit to Jacksonville, Northwest Airlines:

Wed. July 22 to Wed. July 29, Saturday night stayover: $229

Wed. July 22 to Thurs. July 23, overnight: $469

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