Wednesday, June 22, 2011

Robot market and the perfect price


I remember from economics class how firms try to navigate pricing. On one side of the spectrum, if you negotiation with each and every customer, you will be able to get the perfect price for each customer. But this takes too long plus it all depends on the skill of the negotiator. So companies decide to set a standard price. This way companies don't have to train every sales rep in negotiation, plus they can conduct business quickly.
Imagine at the grocery store

Clerk: "One can of beans, four dollars."
You:"Four dollars, this is absurd. I will give you a quarter"
Clerk: "A quarter, no sir. That will not even cover the cost of the can those beans are in. A dollar, this is my best price"
You: "Ok a dollar."
Clerk: Scans beans and sends them down to the bags. Picks up other can of beans. "One can of beans, 5 dollars."
You: "Five dollars, you just sold me the identical one for a dollar"
Clerk: "Everyone knows you need two cans of beans to make anything."

This situation is absurd in a western style supermarket. Supermarkets make up for their lack of negotiating a perfect price for each item by volume.

But what if supermarkets could train a robot. A robot that is an expert negotiator and has an unlimited amount of time. Time and negotiation skills are the only two things that are keeping supermarkets from getting the perfect price.

I found the robot. And it is inside the ticket pricing of airline ticket sales.

As I was booking my flight to Portland. I stepped away from the computer to eat dinner. When I came back, the ticket price increased $100 dollars. I couldn't believe it. I saw red glowing letters in the lower corner, 2 seats left. I remembered this feeling from the markets of India. If you come back to a vendor, he knows you are desperate and can jack the price. But,how could the airlines know it was me coming back?
I logged out, then searched without logging in, to see if I could mask my identity. The price had jumped by another 50 dollars. This was getting ridiculous. I was feeling jerked around. I logged in via a virtual connection, so there was no way the airlines could trace my computer. The price was holding steady at 150 dollars above what I initially thought I was going to pay. I pulled up Amtrak and realized that their prices are a joke. I pulled up a driving map to Portland and realized I couldn't make it in time. I decided to sleep on it. The next morning I searched again and the price dropped back down to the original level I was set on.

I don't know what sort of robot I was negotiating with, but I dealt with it the same way I did the in markets of India. I just kept asking for the same price over and over again, refusing the answer I didn't want to hear.

Intercultural Tip: Specific cultural skills are not always culturally bound. Find ways to apply skills learned abroad in the new context back home.

2 comments:

  1. I think its because the computer programers were probably indian

    ReplyDelete
  2. that is craziness! also, is that you in the picture? also, this is my new favorite flight-finding site. for reals. http://www.hipmunk.com/

    ReplyDelete