The Daily Dish
March 4, 2024
I Am Sick of the Discounts
It is Monday and Eakinomics is angry. It has spent the weekend stewing over the manifestly unfair pricing schemes littering the economic landscape. There is a toll on my commute to work on I-66. But this weekend it was free. What is up with that? And when I checked on beach rentals, it turns out that right now the weekly rent is one-half of what I will pay next summer. The nerve! And what is up with happy hour drink prices? Stop it! When we went to the theater, matinee tickets were $2 less than the evening performance. Those bastards! Come to think of it, what is up with these senior citizen discounts? Just because I buy something at a different time in the life cycle, it is cheaper? What the hell is that? (Although, truth be told, just being eligible makes me angry!)
If this strikes you as silly and mistaken, you are right. But this is precisely the same phenomenon that triggered populist outrage when in an earnings call, Wendy’s President and CEO Kirk Tanner spoke about the company’s digital menu boards and their potential. He said, “Beginning as early as 2025, we will begin testing more enhanced features like dynamic pricing.”
The left went ballistic, led by freakout-in-chief Elizabeth Warren who posted on X: “.@Wendys is planning to try out ‘surge pricing’ — that means you could pay more for your lunch, even if the cost to Wendy’s stays exactly the same. It’s price gouging plain and simple, and American families have had enough.”
A little reflection reveals that there is a lot of time-of-day/week/year/life pricing in the economy. The flip side to higher peak-time prices is discounts for off-peak purchases. This makes a lot of sense. For those consumers who have some flexibility, the shift to off-peak smooths out the demand and saves money because it requires less peak capacity to serve customers. It is an entirely rational approach.
So ignore the fuss about surge pricing or dynamic pricing or whatever it will be called today, and consign the criticisms to the same waste bin of history heretofore reserved for greedflation, shrinkflation, and junk fees.
Fact of the Day
Due to large-scale subsidies to clean (non-fossil) energy in the Inflation Reduction Act, California will not realize the over $27 billion in Medicare savings from the IRA's “inflation tax” and drug price negotiation.
