While such strategies persist in used car showrooms and flea markets, they mostly went out of fashion in the developed world a few hundred years ago when fixed prices came along. Some think it started with department stores — Bennetts in Derby in the 18th century or John Wanamaker’s stores in Philadelphia the next. Others cite Japanese cloth seller Mitsui Takatoshi as the first to introduce fixed single prices.
Either way, the notion that every customer pays the same price has become a foundation of economics. It is partly thanks to universal pricing that inflation statistics have become such an important yardstick of activity, so much so that they are the Bank of England’s primary focus. Andy Warhol touched on the single price in 1975 when he wrote: “America started the tradition where the richest consumers buy essentially the same things as the poorest … the President drinks Coke, Liz Taylor drinks Coke, and just think, you can drink Coke, too. A Coke is a Coke and no amount of money can get you a better Coke than the one the bum on the corner is drinking.”
Except that this isn’t quite right. For years, Coca-Cola has experimented with vending machines that change the price depending on the weather. The hotter it is, the more you pay. Dynamic pricing, as economists like to call this, is mostly uncontroversial. Train tickets are more expensive when you’re travelling during peak times. Plane tickets cost less if you book them in advance and stay over the weekend (that usually sorts the tourists from the business travellers). There have long been discounts for children, students or pensioners.
Yet personalised pricing, the extreme version of dynamic pricing where you are charged according to your willingness to pay, makes much economic sense. In the end, a price is simply the nexus between supply and demand. You want that bottle of wine more than I do, ergo your level of demand for it is greater, so the laws of economics would imply you should pay more for it.
Personalised pricing is fast becoming reality online, where it is relatively easy to single out lucrative customers and discreetly charge them an extra buck.