Comment by WalterBright
2 hours ago
As you can negotiate prices at an appliance dealership, obviously people pay different prices for the same thing. The prices at the grocery store change daily, obviously people are paying different prices for the same thing. The guy you sit next to on an airplane paid a different price than you did. The pump price at the gas station can change hourly.
> They just can't extract further profit by charging richer customers more than marginal cost to transfer the consumer surplus to themselves.
The demand curve is different for every customer.
It is fraudulent to charge more than the posted price. But absent that, it's a negotiated price.
BTW, do you also feel it is unfair if a store charges a person less if the store realizes the person is a bit needy?
Just for fun, watch the movie "Back To School" starring Rodney Dangerfield. The funniest bit in it is when Dangerfield (a real estate developer) lectures the business professor on how business really works.
I've run multiple businesses. It's pretty clear that I did not have any power over the customers. I could not just raise prices and "extract" more profit, much as I would have liked to. It's hard to make money running a business. Businesses go bust all the time. I wouldn't pay too much attention to a business professor who had never run a business.
> The demand curve is different for every customer.
No, the price the customer is willing to pay for a given product is different for every customer. But the demand curve is just the aggregate of all that--how many customers are willing to pay a given price for the product, as a function of the price. There are different demand curves for different products, but the notion that there is a different demand curve for every customer for a single product makes no sense.
> BTW, do you also feel it is unfair if a store charges a person less if the store realizes the person is a bit needy?
I've said nothing whatever about whether or not I agree with the Maryland law under discussion here. I'm just trying to be clear about what the law does and doesn't do.
> I could not just raise prices and "extract" more profit
You can't raise prices for all customers and expect more profit, of course.
But if you can raise prices only for those customers who are willing to pay higher prices, i.e., if you can price discriminate, then yes, you can extract more profit by doing that--as I've said multiple times now, you're transferring what would otherwise be consumer surplus to yourself. And if the cost to you of getting the extra information you need to price discriminate is less than the consumer surplus you're able to extract by doing so, then it's profitable for you to do it if you can.
Doing what I've just described is what the law under discussion here outlaws.