"The median chain could raise its annual profits by $16.1 million a year – or 1.3% – by switching to the optimal varied pricing strategy. This naturally increases inequality considerably"
what's the channel by which inequality increases? wouldnt charging higher prices to higher income customers reduce inequality (as a first order effect)?
the innattentive manager theory seems hard to square with pricing being uniform instead of just surprisingly similar. like i could buy that a manager in san francisco doesn't realize he could charge 2x as much as the store in omaha and so he charges 20% more instead, but to explain *uniform* prices the SF manager has to not even realize he could charge 2% more than the store in omaha
Pricing is set nationally, and the argument that corporate can't set all these prices to different amounts in different locations when they're due to differences in demand.
sure, but the problem remains. why doesn't corporate pick a baseline price and then set the price 1% higher in SF and 1% lower in omaha?
semi relatedly i wonder whether this fits with the price matching literature? maybe they set it at the SF price nationwide and rely on price matching to local chains to get down to the omaha price?
"The median chain could raise its annual profits by $16.1 million a year – or 1.3% – by switching to the optimal varied pricing strategy. This naturally increases inequality considerably"
what's the channel by which inequality increases? wouldnt charging higher prices to higher income customers reduce inequality (as a first order effect)?
[Uniform pricing] increases inequality.
the innattentive manager theory seems hard to square with pricing being uniform instead of just surprisingly similar. like i could buy that a manager in san francisco doesn't realize he could charge 2x as much as the store in omaha and so he charges 20% more instead, but to explain *uniform* prices the SF manager has to not even realize he could charge 2% more than the store in omaha
Pricing is set nationally, and the argument that corporate can't set all these prices to different amounts in different locations when they're due to differences in demand.
sure, but the problem remains. why doesn't corporate pick a baseline price and then set the price 1% higher in SF and 1% lower in omaha?
semi relatedly i wonder whether this fits with the price matching literature? maybe they set it at the SF price nationwide and rely on price matching to local chains to get down to the omaha price?