Price Discrimination Explains Everything
By Arnold Kling
I’ve said this many times. I was reminded of it by this story from John Scalzi about tortillas priced higher when priced as “wraps,” which Matt Yglesias suggests provides a means for price discrimination.
In terms of efficient pricing, one smart strategy for a supermarket would be to arbitrarily slap different prices on different identical packages. Thrifty people will spend a little time hunting around for the best price, and people who aren’t price sensitive will just grab whatever and stick it in their bag. Stores don’t do that because people would get angry and end up in arguments with cashiers. But they typically achieve something similar with coupons. People who care about finding a bargain get a bargain, and people who don’t care pay a higher price.