New Pricing Algorithm Charges Consumers MORE Based On ZIP Code

Corporations in the United States have been taking part in something called “surveillance pricing,” which means that they are charging some people more for the same items based on the type of computer they are using, the type of phone they have, or the zip code where they live – and there are virtually no regulations in place to stop this. Mike Papantonio & Farron Cousins discuss more.

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*This transcript was generated by a third-party transcription software company, so please excuse any typos.

Corporations in the United States have been taking part in something called surveillance pricing, which means that they're charging some people more for the same items based on the fact that those people can pay for it. Their zip code shows they can, other purchases show they can. This is an ugly story. You gave me, we're talking about this this morning, the way I see it is airlines all the time, right? Talk about the airline issue to make people understand what's really happening here.

Yeah. So, I do think the airline issue is the biggest, best example of this kind of surveillance pricing. So what happens is you get on your computer and say, you know what? Either I have to take a trip for work, or I'm thinking about taking the family somewhere. So you just quickly, you look at the flight prices, you get an idea in your head and you say, okay, so that's what we're looking at. You go, you talk to your boss about the price. You talk to your spouse about the price. You go back a couple days later, suddenly it's $800 more per ticket. Well, that's weird. Nothing's changed. You still have the same number of seats. Why is it different? Because the surveillance pricing tells the airline, this person has now looked for it twice, they're serious about this trip, which means they're gonna pay whatever you want to charge them. You can up their price. Meanwhile, you take somebody else doing the same thing. They delete their browser history, they clear their cache, clear all the cookies, you get the same price on Monday that you do on Friday.

In other words, it's starting to look like a Caribbean straw market, right? Let's barter, only there's no barter. They know that you've got the ability to pay for something. This person has less ability. So they charge you more. And the ugly thing is, of course it doesn't surprise me, you know what I think of Wall Street, this is being taught in a required course at MIT and Harvard, and it's called this pricing lab. And pricing lab is where they teach people how to do this. They teach CEOs how to take the system, create algorithms to where they said, well, we can charge Farron more because he makes a lot of money and we can charge him a lot of money, but we can't charge this other person. You know what their argument is? Their argument is, oh, that's okay. It's good capitalism. Because what it does, it extends, let's talk about a handbag. You wan to buy handbag for your wife, right? So they're gonna charge you more because you got a lot of money. Or they've got this person over here that doesn't have quite as much money. And they're saying, well, the very fact that that person could buy a handbag, even though we charged 'em less, it enabled 'em to buy handbag. We sold more handbags.

Yeah.

You see how crazy that kind of rationale is? And then they say, this is good for the American consumer.

Yeah. And it goes so much deeper than people realize. David Dayen wrote this for the American Prospect. He's phenomenal on all Wall Street issues.

Oh, he is. I agree.

So one of the things he talks about is that, like you mentioned, they'll look at your zip code and they will say, oh, okay, well this person's in an affluent neighborhood. So everybody in the zip code, whether you're affluent or not, you are gonna be paying higher prices. Then they can tell what kind of device you're on. Well, this person's using a 7-year-old laptop that's barely making it by.

Oh man, okay.

So they can't pay the high prices. This person's got the brand new top of the line MacBook Pro. Go ahead and jump those prices up 10, 15% for this person.

Just by taking a look at what you're using.

And they can tell, oh, he's on an iPhone 11. Obviously he hasn't upgraded, he doesn't have that kind of money.