I was talking to a good friend of mine recently. We happened to be talking about perfect price discrimination–you know, as you do when chatting with friends.
During the course of our conversation, she was reminded of a scene from her childhood. Her younger brother, who was around 9 years old at the time, had been going through his prized football card collection. He was lovingly sorting them in his binders and using his trusted Beckett Price Guide to calculate their worth. The story goes that his dad walked in and managed to quickly shatter his son’s dreams of the riches that all of his cards held…
“You know that’s not really what those are worth,” his dad exclaimed.
“No! It is what they’re worth,” replied the shaken collector. “My guide says so!”
“Nope,” his dad responded frankly. “Those are only worth what someone is willing to pay for them. If no one wants to buy them, they’re worth nothing.”
It didn’t take long for the young card collector to realize his dad was right…but it was a hard lesson to learn. While I’ve heard many pricing stories in my day, I have to say that this is the first one I’ve come across that involved tears.
Of course, looking back on it, the rule that those cards are only worth what someone is willing to pay for them manages to cut both ways. While that Beckett guide provided guidance on what the average price could be, some buyers might put an even higher value on certain cards. (Excusing the fact that published prices often become the defacto price ceiling to educated consumers…)
Once his son was brought to tears, it likely wasn’t the time or the place for the dad to discuss the merits of understanding willingness-to-pay in order to minimize consumer surplus…but that likely would have been a good lesson as well.
After all, consumers and producers both end up happy in perfect price discrimination stories–no tears involved.
All About Price Optimization
The term "price optimization" is being thrown around with such abandon these days that confusion, rather than clarity, is the more likely result. In this on-demand webinar, you'll learn what price optimization really is and how it works.