Stupid Shoppers

Law, The Economy

This is a general shout-out to all the stupid people out there: Thank you! Thank you for buying your memory from Apple (or purchasing a black MacBook), thank you for drinking from the mini-bar at hotels, thank you for bidding more on eBay than Amazon charges, thank you for buying your airline tickets from a travel agent, thank you for getting that additional product insurance offered at the local computer store, thank you for generally wasting money out of laziness and ignorance!

Why? Because you are subsidizing me! As the NY Times reports, customers like you (hell, you probably don’t read blogs) subsidize savvy consumers:

For example, you see an offer for a room at Nontransparent Hotel for $75 (which costs the hotel $100 to provide). The guy checking in behind you also rents a room, but will rack up $70 in fees from the minibar, the phone and garage parking (all of which cost the hotel $20 to provide). You, on the other hand, were not tempted by the minibar, used your cellphone for calls and took public transportation to the hotel. The other guy subsidized your room.

Smart consumers now have a strategy. They should go to the company offering the discounted product even if the company has loads of hidden fees. The sophisticated consumer then exploits the company by taking the below-cost product and shunning the fees. It’s a perpetual battle between the firm that fools consumers into paying fees and the smart consumer who can avoid them,” Mr. Laibson said.

One shouldn’t be too smug, however, it seems that it is getting harder and harder to spot the hidden fees, and even sophisticated consumers” are more and more likely to get duped.

Hewlett-Packard does not tell consumers the price-per-page cost of its printers on its Web site, for example. You have to hunt for the information and do the math yourself. Hotels in South Florida rarely tell you while you are making reservations or checking-in that you will face a $25 resort fee,” which is ostensibly imposed to cover your use of the pool and deck chairs …

Even the most sophisticated people find it hard to game the system when it comes to fees. In earlier research, Mr. Laibson and two colleagues, James Choi of Yale and Brigitte Madrian of the Wharton School at the University of Pennsylvania, learned that even the most knowledgeable people make really dumb decisions even when provided all the information.

Unfortunately, the chances of any kind of government regulation to enforce honesty and transparency is highly unlikely in the current political climate.

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