Price Discrimination of the Day

Neil Young and the Price Discriminators.

Photo by Fredrik Varfjell/AFP/Getty Images

Thanks to the tipster who pointed out to me that Amazon is currently selling Neil Young’s Live at the Cellar Door on CD for $9.99, in a bundle where you also get a free MP3 download of the album. Another option is to just pay $12.49 for the MP3s alone.

What kind of sense does that make? Not much. But basically arbitrary pricing disparities can make sense.

The dream in retail is to offer a really good deal to thrifty people while charging higher prices to everyone else. That’s the point of, say, coupons. Or of stores where half the stuff is 20 percent off at any given time. The idea is that price sensitive people just need to invest a little bit of time, while the lazy/careless/affluent pay a premium. This is basically the same thing. If you’re paying attention, the price is $9.99, but if you’re not, you pay $12.49—the inclusion or noninclusion of the CD is basically a coincidence.