In a seemingly constant audition for corporate funding, many (if not most) economists bend over backwards to defend personalized pricing, often by citing literature related to third-degree price discrimination, such as student or senior discounts. The problem is that personalized pricing is a form of first-degree price discrimination, and the benefits from third-degree price discrimination do not carry over. If we permit a company to charge price-insensitive customers more for the same product, the argument goes, the company can also reduce the price for price-sensitive customers, permitting for an expansion of output. Owens says, archly: “If that sounds like bullshit to you, you’re not alone.” What Owens doesn’t say—again, because she’s not trying to convince conflicted economists—is that so long as the company can charge the price-sensitive types one penny below their willingness to pay under a personalized-pricing regime, no consumer benefits from the exchange.
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