The End of a Fair Price: Dynamic Pricing and the Normalization of Gouging

ppaimapi about 1 hour ago 14 commentsRead Article on prospect.org

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sib•about 1 hour ago

"Did you know that home insurers use aerial drones to study your rooftop? If the conditions signal neglect, they might cancel your coverage before an accident."

While there are certainly some issues of concern in the article and the reviewed book, the above seems like exactly what insurance companies should be doing: pricing (or making available) coverage based upon risk.

This is not much different from an auto insurance company raising your rates (or cancelling coverage) because you've received a number of speeding tickets, which implies increased future risk of loss.

In fact, I received a letter from my homeowners insurance company a couple years ago stating that they would not renew our coverage due to conditions that they'd observed (clearly from aerial imagery) including overgrown bushes touching the walls of the house and some larger tree branches growing over the house.

I had a landscaping company come and fix the issues, sent my own drone up to take new pictures, sent the company the pictures, and they agreed to continue coverage. And now my house has less future risk of damage. This seems like a win-win for both of us.

gpderetta•15 minutes ago

> This is not much different from an auto insurance company raising your rates (or cancelling coverage) because you've received a number of speeding tickets

This is more like your insurer following you around and evaluating your driving skills.

And yes black boxes are a thing but a) are opt-in and b) universally reviled.

mindslight•19 minutes ago

The problem is that every facet they add to the analysis increases the complexity, making it harder to price risk - meaning they'll eagerly overprice [0] (based on "what if") with some idea that "the market" (ie nobody) will sort it out. This creates a race to the bottom against anything that might seem "weird", aka regular people just living their lives, similar to how the ever growing housing bubble has promulgated beige everywhere.

Your bushes only seem like a reasonable example because you are looking at them in isolation - it was only a single issue you had to deal with, and something you seemingly wanted to deal with anyway. If they had instead blasted you with a litany of different issues, or a bush that you wanted to keep for sentimental reasons, or you simply didn't have the time/resources to create your own counter-documentation and operate their heavyweight bureaucracy, you'd be singing a much different tune.

And while these things can happen anyway with regular in-person home inspections, the point is that increasing surveillance and unaccountable "AI" make it much easier to bury customers in a deluge of complexity making for even-less-competitive markets.

(I would give a healthy list of examples of my own home being deficient in many ways an insurance inspector would call out yet are in the process of being managed, but I'm sure it would just invite a lot of "well ackshually" bickering)

[0] Notice how they weren't going to raise your premiums by $30 a year or whatever, but outright cancel your policy - in other words a massive overweighting of the actual risk from some bushes growing into the house.

xnx•20 minutes ago

Competition, and being willing to shop around is the only thing that has ever kept prices down.

nayuki•20 minutes ago

> Uber is another key villain in Gouged. Per Owens, Uber’s “greatest innovation wasn’t ‘disrupting’ the taxi industry—it was socializing and normalizing the very idea of dynamic pricing. They made us comfortable with the notion that prices could change at any moment.”

In my opinion, Uber has several key innovations over traditional taxi services:

* An accurate machine-provided fare quote that you can review at your leisure before agreeing to take a trip. (Instead of, like, calling a human dispatcher to ask for a quote.)

* The fact that the passenger can't screw over the driver by making fake requests and not showing up, or running off at the end of a trip - because the online platform is in charge of the payment collection.

* The fact that the driver can't screw the passenger over by driving extra distance, because the price is set ahead of time.

> roughly 75 percent of the items in identical Instacart baskets purchased at the same time varied in price from one shopper to the next

If the price differential is large enough, it sets up an opportunity for arbitrage. Maybe if 10 people cooperate and compare notes on each of their Instacart account's product prices, and then make group purchases using the account with the lowest prices...

In general, it's harder (though not impossible) to price-discriminate on goods rather than services. If seniors get a grocery discount for example, then it might be worthwhile to hire a senior to purchase things on your behalf.

bix6•about 1 hour ago

At 176 pages I may read it but also I’m already so exhausted by this topic since nothing is changing.

autoexec•26 minutes ago

It is changing. It's accelerating, spreading, and getting worse all the time.

bbor•about 1 hour ago

A yes, capitalism; a system that works perfectly as long as communication and data processing technology is innefficent enough to put a natural efficiency limit on all firms. Reminds me of the scandal around rental price "collusion", which ultimately was kinda just really effective software for doing stuff that would normally be fine.

*ETA:* And FWIW, the author here goes about as far towards that as they can -- a shoutout at the end! Anything else would be decried as biased, after all. Great article; shame it'll soon be downranked by the wonderful machines running this place :(

bix6•about 1 hour ago

You mean like withholding units from the market to overcharge renters when there’s people sleeping on the streets? Totally fine.

bbor•41 minutes ago

That feels like a worthy critique but I'm not sure it relates? That's just how capitalism prioritizes capital over anything else, which is the core problem of course but isn't super related to the problems of increasing information. In fact, wouldn't this technique get harder to pull off as renters have access to better and better tools themselves?

RangerScience•31 minutes ago

I wouldn’t expect it to; better information, without power to act on it, doesn’t do much.

That said, this’d be one of those things where you can say “this is my prediction”, and if it doesn’t come true, go looking for the forces and factors you missed from your initial prediction.

EA-3167•33 minutes ago

Are you under the mistaken impression that chronic homelessness is caused by lack of housing supply? It’s much more correlated with mental illness and addiction in people who can’t be forced into care, but still desperately need it.

bbor•3 minutes ago

Your empirical claims are extremely incorrect, but regardless this whole discussion will be shut down. Shame -- it really was a good article :(

alphawhisky•17 minutes ago

Are you under the mistaken impression that housing is not a human right? Do you protest your taxes being too high in response to this argument? They're much more correlated with the total number of children in 3rd world countries that got blown up in a given year. I can't force you to care, but you still desperately need it. Fiscally, it's asinine to talk about the costs associated with this if you refuse to care about the actual holes in the US's pocketbook.