I was listening to CBC's The Cost of Living and learned about surveillance pricing. To me, it seems to undermine markets as much as the deep-pocket advantage.
The reason is that the justification for markets is "efficiency". The equilibrium price ensures that those who are willing to pay for something have good reason to be able to afford it. In essence, they will be able use the goods/services in such a way as to make back the cost, whereas those who can't do so cannot afford the good/service. The former is satisfying a "greater demand", and in this way, they're utilizing the good/service more "efficiently".
With surveillance pricing, there is no market equilibrium price since a seller charges everyone what they can individually bear. Doesn't this eliminate the concept of an equilibrium prices that serves as a threshold for those who can use a good/service "efficiently"?
Please note that I am not arguing that market efficiency as defined above is the same as societal good. I am simply assuming that it is its own metric.
Does surveillance pricing nullify the concept of a market?
byu/MereRedditUser inAskEconomics
Posted by MereRedditUser
1 Comment
The economic term here is [price discrimination](https://en.wikipedia.org/wiki/Price_discrimination), and a market with perfect price discrimination is still efficient. However the [consumer surplus](https://en.wikipedia.org/wiki/Economic_surplus) is lower
In a perfectly competitive market, price is equal to marginal cost. There is no trade that makes both the producer and the firm better off. If you have a monopoly, they can set the price to where marginal cost equals marginal revenue. This leads to consumers whose utility for said good being between the marginal cost and monopoly price. If the monopoly could sell to this person at a lower price, both parties would gain. However, the monopoly can’t, because it would have to lower the prices for everybody, reducing its revenue, so it’s not efficient.
Now, if the firm can (perfectly) observe every consumer’s utility, they can charge each consumer exactly what they are willing to pay. Once again, no trade can increase the welfare of both the firm and a consumer, so it’s efficient. It’s just that the consumer surplus is 0, and all of it is captured by the producer.