Has Air New Zealand been shopping us for some time?

April 26th, 2017

Should you book with Air New Zealand on a different device from the device you use to check availability and fares?

I’ve been suspicious for some time that Air New Zealand’s “dynamic” pricing pushes up fare quotes when the enquirer’s device has previously checked for space and fares on particular flights. When they know you really want a particular flight, its cheap seats seem to disappear.

Patrick Watson’s newsletter reminded me of this suspicion with a comment headed “Shopping the Shoppers”

“On the surface, online shopping seems to favor shoppers. It’s easy to compare prices, shipping cost and time, sales tax, and other factors to get the best deal. Retailers have to offer lower prices to make you buy, right?

Well, maybe. Last week, I read a fascinating Atlantic Monthly article by Jerry Useem: How Online Shopping Makes Suckers of Us All. It’s about the sophisticated ways online merchants adjust and even personalize prices to maximize revenue.

For several years I’ve been taking precautions just in case.

Watson goes on:
“A quick excerpt:
“I don’t think anyone could have predicted how sophisticated these algorithms have become” says Robert Dolan, a marketing professor at Harvard. “I certainly didn’t.” The price of a can of soda in a vending machine can now vary with the temperature outside. The price of the headphones Google recommends may depend on how budget-conscious your web history shows you to be, one study found. For shoppers, that means price is ”not the one offered to you right now, but the one offered to you 20 minutes from now, or the one offered to me, or to your neighbor” [. It]may become an increasingly unknowable thing. “Many moons ago, there used to be one price for something” Dolan notes. Now the simplest of questions ”what’s the true price of pumpkin-pie spice?”is subject to a Heisenberg level of uncertainty.
Which raises a bigger question: Could the internet, whose transparency was supposed to empower consumers, be doing the opposite?

In other words, online retailers are now comparison shopping us. Amazon and others are learning how to dynamically adjust prices based on where you came from, what you bought in the past, where you live, what time of day it is, and even the current weather in your zip code.“

Filed under Commercial

Comments

I suspect I have been shopoed by Air NZ.The cheap fares seemed to disappear very quickly when I returned to the site. Hard to prove.

Right, but all of this is intermediated by competition, so it is not the case that this raises prices overall. Rather these companies are better understanding your willingness to pay. For price sensitive shoppers this will lower the prices they pay, at least to the extent the algorithms work. Companies with fixed costs to recover, such as airlines, can lower prices overall if this price discrimination means they can reach more customers and recover their fixed costs from a larger customer base. In this way the strategy can be welfare enhancing overall and for each customer.