The curious economics of being ripped off on holiday(timharford.com)
timharford.com
The curious economics of being ripped off on holiday
http://timharford.com/2019/09/the-curious-economics-of-being-ripped-off-on-holiday/
29 comments
Another way to think about it is offering sales, coupons, etc allow a retailer to offer a lower price floor for their goods, which expands the market for the retailer.
In other words...
Person A: Price sensitive shopper who won't pay more than $2.00 for an Avocado under any circumstance.
Person B: Convenience sensitive shopper who will pay up to $4 for an Avocado.
The grocery store can price using one of two methods... 1) offering the same price to all shoppers, or 2) offering a higher price to most shoppers so that they can offer a lower price to price sensitive shoppers (via coupons, arbitrary sale dates, etc).
With method #1, the grocery store can only sell Avocados to Person B because their prices are permanently higher than Person A is willing to pay. But with method #2, the grocery store can sell to both people because they've created a situation where a less price sensitive person subsidizes the cost of the product purchased by another more price sensitive person. The grocery store makes more money with method #2 in this example (at least hypothetically).
I think the key is realizing that people value things differently. Some people don't look at prices when they shop. Some do. Some people only shop when they think they're saving money, some don't care. Some people value convenience + time more than price, some are the reverse.
Obviously this example doesn't really apply to the first part of your comment about "Grief economy", just the 2nd part about coupons + pricing.
In other words...
Person A: Price sensitive shopper who won't pay more than $2.00 for an Avocado under any circumstance.
Person B: Convenience sensitive shopper who will pay up to $4 for an Avocado.
The grocery store can price using one of two methods... 1) offering the same price to all shoppers, or 2) offering a higher price to most shoppers so that they can offer a lower price to price sensitive shoppers (via coupons, arbitrary sale dates, etc).
With method #1, the grocery store can only sell Avocados to Person B because their prices are permanently higher than Person A is willing to pay. But with method #2, the grocery store can sell to both people because they've created a situation where a less price sensitive person subsidizes the cost of the product purchased by another more price sensitive person. The grocery store makes more money with method #2 in this example (at least hypothetically).
I think the key is realizing that people value things differently. Some people don't look at prices when they shop. Some do. Some people only shop when they think they're saving money, some don't care. Some people value convenience + time more than price, some are the reverse.
Obviously this example doesn't really apply to the first part of your comment about "Grief economy", just the 2nd part about coupons + pricing.
This concept is called 'price discrimination'. The idea is that it is most efficient for a store to charge every customer the exact amount they are willing to pay before they would decide not to buy.
Complex and systematic price discrimination is probably most easily seen in the models used to price airline tickets, which involves interesting decisions like how many seats to initially reserve for business class, then how long you wait to open them up with non-business class pricing (upgrade your seat now for only $75!).
It’s often said that no two seats on an airline have exactly the same cost.
A simple one is eBay's "Buy It Now".
I don't agree that's simple, nor (strictly) price discrimination.
The most obvious added value is faster delivery: ship today instead of in X days/weeks when the auction ends.
It also has weird value if you for some reason believe the BIN price is undervaluing the item, i.e. you can short-circuit the auction before anyone else realises.
The most obvious added value is faster delivery: ship today instead of in X days/weeks when the auction ends.
It also has weird value if you for some reason believe the BIN price is undervaluing the item, i.e. you can short-circuit the auction before anyone else realises.
Price discrimination can be even more flexible than that - for example someone who sells things in a flea market. The ideal seller would price their goods at exactly the highest rate each buyer is prepared to pay. They try to do this by judging if the person looks well off, or is a tourist, willingness to haggle etc.
Thank you, I hadn't seen coupons and sales in this light before. I've been thinking of them in terms of offering the same price to all customers, but this framing that takes convenience and time into account makes the whole system seem much more sensible.
>> Obviously this example doesn't really apply to the first part of your comment about "Grief economy", just the 2nd part about coupons + pricing.
> makes the whole system seem much more sensible
But doesn't it apply there too? Price discrimination has many forms, but a less pretty way of describing that one is the retailer creates non-monetary external costs and mixes them into offers, to discourage customers from simply switching to offers where less money changes hands.
Imagine instead of a "spend time clipping coupons rather than reading with your kids" proof-of-work, the retailer creates an offer which requires someone to degrade themselves, to crawl on the floor and beg, to obtain a low price. This happily permits the retailer to extend affordable service to the desperate, without more profitable customers thinking it worth switching offers! So... yay?
Issues include at least some created work functions not having inherent societal value (coupon clipping is perhaps more like bitcoin factorization than like ai-training captchas). And that created costs, and simply the customer categorization they are but one way to obtain, can have negative impacts on lives and society.
It seems economics conversations are often more explicit about value creation and flow, but less transparent about the creation of "negative value", where it ends up, and its effects. There's more involved with an avocado coupon than merely a pair of price discriminated avocado sales.
> makes the whole system seem much more sensible
But doesn't it apply there too? Price discrimination has many forms, but a less pretty way of describing that one is the retailer creates non-monetary external costs and mixes them into offers, to discourage customers from simply switching to offers where less money changes hands.
Imagine instead of a "spend time clipping coupons rather than reading with your kids" proof-of-work, the retailer creates an offer which requires someone to degrade themselves, to crawl on the floor and beg, to obtain a low price. This happily permits the retailer to extend affordable service to the desperate, without more profitable customers thinking it worth switching offers! So... yay?
Issues include at least some created work functions not having inherent societal value (coupon clipping is perhaps more like bitcoin factorization than like ai-training captchas). And that created costs, and simply the customer categorization they are but one way to obtain, can have negative impacts on lives and society.
It seems economics conversations are often more explicit about value creation and flow, but less transparent about the creation of "negative value", where it ends up, and its effects. There's more involved with an avocado coupon than merely a pair of price discriminated avocado sales.
> created a situation where a less price sensitive person subsidizes the cost of the product purchased by another more price sensitive person.
Assuming 1:1 $2:$4 sales, say the cost is $1. They make $4 if they sell w/ coupon or not. The coupon chasing customer is a lower value customer because it actually takes some overhead to make coupons and to constantly convince them to be a customer. Whereas you can price at $3 and look like a champ compared to your $2 (secret coupon) /$4 (advertised price) competitors...
Assuming 1:1 $2:$4 sales, say the cost is $1. They make $4 if they sell w/ coupon or not. The coupon chasing customer is a lower value customer because it actually takes some overhead to make coupons and to constantly convince them to be a customer. Whereas you can price at $3 and look like a champ compared to your $2 (secret coupon) /$4 (advertised price) competitors...
Charging $3 dollars will mean you $2 of profit with 50% of your customers, and $0 with the rest (as they won't buy it). The coupon strategy will make you $3 with 50% and $1 with the rest. The cost of issuing the coupons themselves is small.
Not only is the coupon strategy twice as profitable for you, more customers are walking out of your store paying a price they were happy with, so you've likely got higher consumer satisfaction.
Hence why price discrimination is somewhat win-win.
Not only is the coupon strategy twice as profitable for you, more customers are walking out of your store paying a price they were happy with, so you've likely got higher consumer satisfaction.
Hence why price discrimination is somewhat win-win.
> Whereas you can price at $3 and look like a champ
But who thinks you look like a champ?
To Person A (the person who won't pay more than $2), they won't be a customer because you've outpriced them. To Person B (the shopper who doesn't care if they pay $3 vs. $4) you look exactly the same, because they probably put the Avocado in their cart without even checking the price.
But who thinks you look like a champ?
To Person A (the person who won't pay more than $2), they won't be a customer because you've outpriced them. To Person B (the shopper who doesn't care if they pay $3 vs. $4) you look exactly the same, because they probably put the Avocado in their cart without even checking the price.
I once sold a car to a man for $500 more than my initial asking price because he made me mad with ridiculous haggling.
I thought it would make him just go away. He produced the money instantly. I've always wondered about that...
I thought it would make him just go away. He produced the money instantly. I've always wondered about that...
I once heard a haggling tip when buying something: make an initial offer, when the seller make a counter offer, walk away. Then go back a little later and offer slightly less than your first offer. The psychological effect is to make the seller feel like he’ll either lose the deal or end up at an even lower price. It sounds like you basically used the reverse trick on this particular buyer.
>I once heard a haggling tip when buying something: make an initial offer, when the seller make a counter offer, walk away. Then go back a little later and offer slightly less than your first offer. The psychological effect is to make the seller feel like he’ll either lose the deal or end up at an even lower price.
That wouldn't work well in e.g. some chinese markets, where the vendors sell to touristy looking people for 5x or 10x the reasonable price.
So, they ask for $200, you make an initial offer of $150, they refuse, you leave, then come back and make an offer of $120. They accept it and you think you've won -- but they might have gone down to $50 too...
https://www.youtube.com/watch?v=_IJhD6D75tE
That wouldn't work well in e.g. some chinese markets, where the vendors sell to touristy looking people for 5x or 10x the reasonable price.
So, they ask for $200, you make an initial offer of $150, they refuse, you leave, then come back and make an offer of $120. They accept it and you think you've won -- but they might have gone down to $50 too...
https://www.youtube.com/watch?v=_IJhD6D75tE
as someone who also appreciates the subtle arts of haggling, you might enjoy the book Getting to Yes. It's more about negotiation than haggling but very interesting and practically useful.
Yes, this and its successor "Getting Past No" are good to understand the ways you can bend a negotiation.
An explanation would be that your asking price was ridiculously underpriced. The man saw that and thought you are obviously clueless, maybe he can make you go even lower. After you raised the price he abandoned that strategy and just bought it.
the few times I've sold things on craigslist or whatever (I'm usually a buyer) as soon as the person has accepted my offer I'm instantly concerned that I way underpriced it and want to reneg lol.
If I'm posting something on Craigslist, I'm usually more interested in getting rid of it than getting the best price.
Yeah, that is a puzzler. According to Adam Grant, those who are intelligent negotiators don't necessarily get better short-term results for themselves, but their business partners do better, maybe because smart negotiators value the win-win for the long-term relationship.
How this other guy was so bad that it made him look smart? Wow, head scratcher. Maybe he thought "Now HERE is a good negotiator, after all my BS he raises the price". Haha.
How this other guy was so bad that it made him look smart? Wow, head scratcher. Maybe he thought "Now HERE is a good negotiator, after all my BS he raises the price". Haha.
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If you just raised the price and did not tell him why, he may have thought it was a consequence of you having a stronger negotiating position, like there was another buyer, his negotiating time was limited and he should make the payment while he still had control.
Any one know what happened to Saturn's fixed price cars idea? I know the brand is gone, but not sure if its troubles had anything to do with fixed prices.
Doesn’t Tesla do that too?
No idea about new cars, but Carmax is a nationwide used car dealership chain that does no-haggle pricing.
Well Saturn went away around 2008 I think. But IIRC Scion had fixed prices, but then Toyota ended the Scion brand in 2016.
Lots of used car brands doing that now. "No Haggle Pricing"
I have noticed their prices are consistently lower than the asking price at high touch dealerships. Especially when you remove hidden feels like "Doc fee" .
I will likely buy from a place with a fair advertised price sooner than walking in at an advertised price of 125% aiming to negotiate it down to 95%.
I have noticed their prices are consistently lower than the asking price at high touch dealerships. Especially when you remove hidden feels like "Doc fee" .
I will likely buy from a place with a fair advertised price sooner than walking in at an advertised price of 125% aiming to negotiate it down to 95%.
You can also outsource it for new cars, e.g. Unhaggle.com
He needed the car, and was worried you'd go higher!
> "For example, calling Comcast to cancel. The company is paying pennies per hour to have you on hold. But its costing you your real time. Therefore comcast can easily suffer more in the process and ultimately could just wait you out..."
That's why you call them while you've got something else to do. Put them on speaker while playing a computer game, doing the laundry, or whatever else you'd prefer to be doing, as long as it's something that's easy to pause as soon as they pick up the phone.
Or better yet: do business with the company with the most responsive customer service.
That's why you call them while you've got something else to do. Put them on speaker while playing a computer game, doing the laundry, or whatever else you'd prefer to be doing, as long as it's something that's easy to pause as soon as they pick up the phone.
Or better yet: do business with the company with the most responsive customer service.
It's seemingly not the case that Comcast has competitors in any given area of the U.S.
>I sometimes call it the "Grief economy" -- The entity which can suffer the most grief "wins" .
This is sadly true of human relationships as well. I've seen it phrased as "the person who cares the least in a relationship has the most power". If you are madly in love with your partner but they are slightly cooler on you, they are in a stronger position because they are more willing to risk or even break the relationship to get what they want. If you're a very clean person but your roommate is a slob, you're screwed because they're just fine with a level of mess that will quickly drive you nuts.
This is sadly true of human relationships as well. I've seen it phrased as "the person who cares the least in a relationship has the most power". If you are madly in love with your partner but they are slightly cooler on you, they are in a stronger position because they are more willing to risk or even break the relationship to get what they want. If you're a very clean person but your roommate is a slob, you're screwed because they're just fine with a level of mess that will quickly drive you nuts.
> a stronger position because they are more willing to risk or even break the relationship to get what they want
IMO the treatment of such power speaks volumes of a persons character and would either attract or disgust me ...
IMO the treatment of such power speaks volumes of a persons character and would either attract or disgust me ...
I think the implication is that this happens subconsciously, not on purpose.
In manipulation, there is a technique where if you want favour from someone, beat them to it by giving them something in advance.
This is a psychological ploy, and it doesn't even have to be all that meaningful of an item. At trade shows, it could be yet another novelty pen, an uninflated balloon with an outdated industry joke printed on it, a sticker you'll never stick, or whatever -- something they gave you, and that you will carry around. They don't give out t-shirts or cheap raffle tickets for neon pink Teslas just because they suspect you need one. They're triggering your brain into wanting to give them something in return - your time, your money, your resources. Well, inevitably it's always to eventually sell you whatever their product is, to avoid returns, and get/keep you on board.
A coupon is only one step outward from there. With a coupon, you actively "clip" it or whatever, keep it aside, carry it to the store and then cash it in. Basically a coupon is lame schwag with a hint of psychological manipulation.
If they simply docked the price by 15 cents, nobody would care and the item would probably only sell at normal volume. But on coupons, your brain has been actively trying to pay them back for the honour of having that coupon. Notice, the store honours or redeems them, but only if you hurry and do it before the deadline. You always feel like you're holding up the line and inconveniencing everyone all around for the honour of using them, yet they happily abide you. Because that was the intent all along.
Yes, I'm a couch psychologist. But on this, I don't think I'm very far off the mark.
This is a psychological ploy, and it doesn't even have to be all that meaningful of an item. At trade shows, it could be yet another novelty pen, an uninflated balloon with an outdated industry joke printed on it, a sticker you'll never stick, or whatever -- something they gave you, and that you will carry around. They don't give out t-shirts or cheap raffle tickets for neon pink Teslas just because they suspect you need one. They're triggering your brain into wanting to give them something in return - your time, your money, your resources. Well, inevitably it's always to eventually sell you whatever their product is, to avoid returns, and get/keep you on board.
A coupon is only one step outward from there. With a coupon, you actively "clip" it or whatever, keep it aside, carry it to the store and then cash it in. Basically a coupon is lame schwag with a hint of psychological manipulation.
If they simply docked the price by 15 cents, nobody would care and the item would probably only sell at normal volume. But on coupons, your brain has been actively trying to pay them back for the honour of having that coupon. Notice, the store honours or redeems them, but only if you hurry and do it before the deadline. You always feel like you're holding up the line and inconveniencing everyone all around for the honour of using them, yet they happily abide you. Because that was the intent all along.
Yes, I'm a couch psychologist. But on this, I don't think I'm very far off the mark.
This seems like a great way to think about this. The core reason why these kinds of patters keep popping up is that making people jump through hoops to get discounts is an effective way to price discriminate based on how much people value their time, and how much you value your time is going to have a very strong correlation with how much you're possibly willing to pay.
I think the fixes for this are largely going to be cultural. For example something that could help is everyone having more pride and simply refusing to jump through pointless hoops for a discount (even if it is technically worth their time).
I think the fixes for this are largely going to be cultural. For example something that could help is everyone having more pride and simply refusing to jump through pointless hoops for a discount (even if it is technically worth their time).
Would be interesting to have a web shop with a repeatable "Solve this captcha for an X% chance of decreasing your price by $0.YY", where it doesn't let you go past a price floor and X and Y decreases as price approaches floor. Discount expires in an hour or few.
Ideally, you'd use a functional captcha, but even without, it seems it would be as useful to society as most current price discrimination techniques.
I'd imagine people would be much more likely to make a purchase if they have already invested 20 minutes solving captchas to save a few bucks.
Ideally, you'd use a functional captcha, but even without, it seems it would be as useful to society as most current price discrimination techniques.
I'd imagine people would be much more likely to make a purchase if they have already invested 20 minutes solving captchas to save a few bucks.
Some sites have a "spin to get a discount" feature. I would imagine you can just enter new email addresses until you get the max discount.
> The best customer is one that comes in and says "I want this item, I will pay a reasonable price right now and walk out a happy customer"
These customers are not price sensitive. So you do not want to give them the best deal. Instead the profit maximizing technique is to find customer who won’t pay your “reasonable price” but will pay some smaller amount. You make them jump through hoops so you don’t cannibalize your “reasonable customer” sales.
When done right every customer is paying what they consider “reasonable”. For some that is more money than others.
These customers are not price sensitive. So you do not want to give them the best deal. Instead the profit maximizing technique is to find customer who won’t pay your “reasonable price” but will pay some smaller amount. You make them jump through hoops so you don’t cannibalize your “reasonable customer” sales.
When done right every customer is paying what they consider “reasonable”. For some that is more money than others.
Maybe. I just spent a month trying to buy (not all of that time, obviously) two articles of clothing. I had fairly specific criteria ( black, hoodie + joggers, zipper on hoodie, thick and soft material on both), which most stores could not fulfil.
It was strange. Major sportswear brands make the items I want. I have the money. I'm willing to pay, frankly, much more than the product is worth for most people. But the issue seems to be, somehow, retailers do not stock enough of the kinds of things I want that I could actually buy them.
IOW, the maths of supply and demand seems to be a bit more complicated than one might expect.
It was strange. Major sportswear brands make the items I want. I have the money. I'm willing to pay, frankly, much more than the product is worth for most people. But the issue seems to be, somehow, retailers do not stock enough of the kinds of things I want that I could actually buy them.
IOW, the maths of supply and demand seems to be a bit more complicated than one might expect.
But why waste everyone's time with all that noise?
The scarcity of the coupon diminishes the discount and wastes real people's lives on triviality.
I'd rather maximize profit by delivering more to my customers, not by extracting more for the same.
The scarcity of the coupon diminishes the discount and wastes real people's lives on triviality.
I'd rather maximize profit by delivering more to my customers, not by extracting more for the same.
Coupons are typically for low-margin goods, such as groceries. There's not much "more" to deliver. And companies do it because they tend to get more profit than if they didn't do it.
There's tons more to deliver and companies are innovating in the space. For example those prepared dinners you still cook fresh, impossibly meatless meat, delivery instead of shop yourself, direct farm to consumer (powered by ecommerce)
Which are all luxury upsells on life-ncessary goods, that the 90% of the population can't, or doesn't want to waste money on.
Coupons and similar time-wasters optimize the revenue that you get from that 90%.
Coupons and similar time-wasters optimize the revenue that you get from that 90%.
What do you do once you're a mature, commoditized company with no room left to innovate? Maybe you wouldn't try to milk your customers for as much as they're worth, but you'll eventually retire sell your company to the highest bidder, who probably will.
This is exactly why consumers need ways to subvert and compete with markets beyond just making individual purchasing decisions. Without a continual pressure in the opposite direction, markets will eventually optimize to be the most exploitative version of themselves that they can be.
When people look at capitalism as a competitive system between multiple businesses, they're looking at an incomplete, broken system. Capitalism should be seen as a competitive system between (at least) businesses and consumers.
Open Source is one way that consumers are able to place competitive pressure on the software industry without starting their own businesses. Open Source products are available for free, often developed at a loss, and they subvert the expectation that software features have to be profitable to exist. Businesses are forced to compete with free, which forces them to implement consumer-friendly features that wouldn't otherwise be profitable.
Adblocking is another important force dictating online content rules -- it allows customers to directly reject a business model, by subverting the idea that profitable content can be forcibly bundled with unprofitable content. Then you have more grey-market pressures like piracy, which forces companies to compete on delivery mechanisms and not just on content.
This kind of subversion helps commoditize content, making it difficult for industries to monetize products that they'd otherwise tightly control. Industries describe this as a bad thing -- if a business model isn't profitable and if creators aren't making money, then something's wrong. But this is consumers doing what they're supposed to do. It is good for consumers to compete by circumventing business models.
In this case, what we'd like to see is consumers colluding to share coupons and deals, so everyone can get the best price. We want to force sellers to negotiate with consumers as a single group, not with each individual person. To a certain extent, we are seeing this, which is why you see certain businesses getting more aggressive about hiding their charges and making coupons harder to share.
When people look at capitalism as a competitive system between multiple businesses, they're looking at an incomplete, broken system. Capitalism should be seen as a competitive system between (at least) businesses and consumers.
Open Source is one way that consumers are able to place competitive pressure on the software industry without starting their own businesses. Open Source products are available for free, often developed at a loss, and they subvert the expectation that software features have to be profitable to exist. Businesses are forced to compete with free, which forces them to implement consumer-friendly features that wouldn't otherwise be profitable.
Adblocking is another important force dictating online content rules -- it allows customers to directly reject a business model, by subverting the idea that profitable content can be forcibly bundled with unprofitable content. Then you have more grey-market pressures like piracy, which forces companies to compete on delivery mechanisms and not just on content.
This kind of subversion helps commoditize content, making it difficult for industries to monetize products that they'd otherwise tightly control. Industries describe this as a bad thing -- if a business model isn't profitable and if creators aren't making money, then something's wrong. But this is consumers doing what they're supposed to do. It is good for consumers to compete by circumventing business models.
In this case, what we'd like to see is consumers colluding to share coupons and deals, so everyone can get the best price. We want to force sellers to negotiate with consumers as a single group, not with each individual person. To a certain extent, we are seeing this, which is why you see certain businesses getting more aggressive about hiding their charges and making coupons harder to share.
Except that some like me will just not bother buying from you at all.
If done right you won’t even know its happening. The best companies setup entirely different brands to segment the market.
Joel Spolsky had written few years ago about why companies do this: https://www.joelonsoftware.com/2004/12/15/camels-and-rubber-...
>I've long been thinking about this topic. I sometimes call it the "Grief economy" -- The entity which can suffer the most grief "wins" . For example, calling Comcast to cancel. The company is paying pennies per hour to have you on hold. But its costing you your real time. Therefore comcast can easily suffer more in the process and ultimately could just wait you out...
Nothing that a law that every businesses should have a one click cancel process you can easily and immediately use when you want to, can't fix...
Nothing that a law that every businesses should have a one click cancel process you can easily and immediately use when you want to, can't fix...
Resort fees are probably one of the best examples of rip-offs that travelers have become accustomed to (but still loathe).
Fortunately, there is a proposal to make it illegal to list prices without including mandatory fees. [1] This would include "resort fees" for hotels and "cleaning fees" for airbnbs or other rentals.
1: https://www.sfgate.com/travel/article/hotel-resort-fees-Cong...
Fortunately, there is a proposal to make it illegal to list prices without including mandatory fees. [1] This would include "resort fees" for hotels and "cleaning fees" for airbnbs or other rentals.
1: https://www.sfgate.com/travel/article/hotel-resort-fees-Cong...
> the legislation would prohibit hotels and other lodging providers from advertising room rates that do not include all mandatory charges other than government taxes and fees
so close, but what does "fees" include? If that legislation required them to include tax _then_ I would be excited
so close, but what does "fees" include? If that legislation required them to include tax _then_ I would be excited
Remember how credit cards had a bunch of consumer legislation passed a few years ago to protect consumers in the US?
And how airfare comparison sites are required by law to show full prices, not before airport fees etc. the way they did way back when?
It's time for the same kind of legislation to be applied to car rental companies, and enforced on reservation sites so their policies apply worldwide (e.g. when an American books a car to rent from Hertz in Spain, they can't resort to saying it's a foreign subsidiary the law doesn't cover). I'd say they're now the #1 source of sneaky fees and hidden upsells, even worse than banks, cell service providers, and internet providers at this point.
Surprise fees at time of booking should be illegal (e.g. "driving out of country"), and "extra processing" fees (e.g. for a toll with no choice) legislated to a reasonable level (e.g. $5 instead of $50) -- the same way credit card late fees are currently set by law. And toll transponders included in the base price in any country that has any roads where paying in cash is unavailable.
Where's the movement for this? Why aren't we all writing our representatives about this?
And how airfare comparison sites are required by law to show full prices, not before airport fees etc. the way they did way back when?
It's time for the same kind of legislation to be applied to car rental companies, and enforced on reservation sites so their policies apply worldwide (e.g. when an American books a car to rent from Hertz in Spain, they can't resort to saying it's a foreign subsidiary the law doesn't cover). I'd say they're now the #1 source of sneaky fees and hidden upsells, even worse than banks, cell service providers, and internet providers at this point.
Surprise fees at time of booking should be illegal (e.g. "driving out of country"), and "extra processing" fees (e.g. for a toll with no choice) legislated to a reasonable level (e.g. $5 instead of $50) -- the same way credit card late fees are currently set by law. And toll transponders included in the base price in any country that has any roads where paying in cash is unavailable.
Where's the movement for this? Why aren't we all writing our representatives about this?
Why limit it to credit cards, airfare, and car rental? Why shouldn't this apply to every product and service sold, period?
Just a question of cost/benefit I think.
In long-established and stable industries like these, regulation can benefit the consumer and we can trust it will still mostly make sense five years from now.
But when industries are evolving quickly, nobody knows which regulations will actually create benefit or harm to consumers (law of unintended consequences) and by the time they're written they might already be out of date.
In long-established and stable industries like these, regulation can benefit the consumer and we can trust it will still mostly make sense five years from now.
But when industries are evolving quickly, nobody knows which regulations will actually create benefit or harm to consumers (law of unintended consequences) and by the time they're written they might already be out of date.
I agree with your principle, but I don't think transparent pricing is an item that should fall under that umbrella. It's just basic honesty.
The price you advertise is the price it sells for, otherwise you have committed fraud. Seems clear to me.
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> Where's the movement for this? Why aren't we all writing our representatives about this?
There's no movement for this because the indignity of being ripped off a few dozen dollars once a year is not a strong enough incentive for people to organize.
Ripping millions of people off by a few dozen dollars, once per year, however, is a strong incentive for car rental places to lobby politicians to protect their business model.
There's no movement for this because the indignity of being ripped off a few dozen dollars once a year is not a strong enough incentive for people to organize.
Ripping millions of people off by a few dozen dollars, once per year, however, is a strong incentive for car rental places to lobby politicians to protect their business model.
I agree overall but "driving out of the country" shouldn't be a surprise fee (and it is often accounted for when you book your rental)
I have good experiences with rentalcars.com, both in US and various countries in Europe. Have not had any surprises in added fees.
They will ask you for extra insurance. Even when not taking that, they all have been reasonable when returning the car. (Although I do always take pictures before I get in).
They will ask you for extra insurance. Even when not taking that, they all have been reasonable when returning the car. (Although I do always take pictures before I get in).
These types of things used to infuriate me. To stop them from ruining my mood on vacations I just account for them as "various other charges". It is sort of like tipping now.
For example, When you book a cruise, the price they give you doesn't bring up the fact that the cruise line also expects you to pay the wages for the wait staff and room stewards. If you bring a family of four (the charge is per person) on a 10+ night cruise (the charge is per night), that charge adds up quickly. Something like $15 charge * 4 people * 14 nights = $840 in charges. That can be a significant percentage of the cost of your entire cruise.
Yes, those in the know, realize that they can change the amount that you get charged by going to guest services - but now if you do adjust those fees... the Cruise line has effectively shifted the guilt of shafting these unfortunate and hard working souls on to you. Hope you sleep well at night. Ugh..
Now when I see these types of charges I just shake my head, sigh and move on. I just account for some percentage of unexpected charges such as these when I visit tourist hotspots - Resort fees, Cleaning Fees, Bag check fee, City fees, the list goes on and on and on. It's not right... but the way I see it I can either fret over all these fees, or just accept that they will be there if I travel to tourist hot spots. I don't really know of a solution.
For example, When you book a cruise, the price they give you doesn't bring up the fact that the cruise line also expects you to pay the wages for the wait staff and room stewards. If you bring a family of four (the charge is per person) on a 10+ night cruise (the charge is per night), that charge adds up quickly. Something like $15 charge * 4 people * 14 nights = $840 in charges. That can be a significant percentage of the cost of your entire cruise.
Yes, those in the know, realize that they can change the amount that you get charged by going to guest services - but now if you do adjust those fees... the Cruise line has effectively shifted the guilt of shafting these unfortunate and hard working souls on to you. Hope you sleep well at night. Ugh..
Now when I see these types of charges I just shake my head, sigh and move on. I just account for some percentage of unexpected charges such as these when I visit tourist hotspots - Resort fees, Cleaning Fees, Bag check fee, City fees, the list goes on and on and on. It's not right... but the way I see it I can either fret over all these fees, or just accept that they will be there if I travel to tourist hot spots. I don't really know of a solution.
> Yes, those in the know, realize that they can change the amount that you get charged by going to guest services - but now if you do adjust those fees... the Cruise line has effectively shifted the guilt of shafting these unfortunate and hard working souls on to you.
Do the staff see any difference anyway? It's not like they get any more money than minimum, and the cruise company is probably pocketing that "wage".
Just like that one asshole delivery company that pockets the "tips" you can opt to give on their app.
Do the staff see any difference anyway? It's not like they get any more money than minimum, and the cruise company is probably pocketing that "wage".
Just like that one asshole delivery company that pockets the "tips" you can opt to give on their app.
Vacations and home renovations: the true cost is at least 20% higher than the budgeted cost. Then there’s healthcare in the U.S., where you can’t budget anyway, and the true cost is anywhere from 200% of what seems reasonable all the way to $just-go-ahead-and-declare-bankruptcy.
T-Mobile's taxes & fees included pricing is the #1 reason I switched to them from AT&T.
Amazon has items for less than $10, but most items with a price between $0.01-$9.99 have to sell for $10.00 for their free shipping economics to work. That's notwithstanding the fee that your license to buy, i.e. Prime, cost you.
In San Francisco, if you sit down at a restaurant, take the written prices on the menu and multiply them by 1.5 to get what you'll actually be paying. I don't think it's that bad in Los Angeles.
Further, in San Francisco, if you sign up for $40/mo fiber Internet, it's really $63.50. Somehow Sonic managed to break past 1.5.
The takeaway is there is no hard and fast rule about transparency in pricing. It's all psychological.
Amazon has items for less than $10, but most items with a price between $0.01-$9.99 have to sell for $10.00 for their free shipping economics to work. That's notwithstanding the fee that your license to buy, i.e. Prime, cost you.
In San Francisco, if you sit down at a restaurant, take the written prices on the menu and multiply them by 1.5 to get what you'll actually be paying. I don't think it's that bad in Los Angeles.
Further, in San Francisco, if you sign up for $40/mo fiber Internet, it's really $63.50. Somehow Sonic managed to break past 1.5.
The takeaway is there is no hard and fast rule about transparency in pricing. It's all psychological.
> In San Francisco, if you sit down at a restaurant, take the written prices on the menu and multiply them by 1.5 to get what you'll actually be paying.
Is this anything other than taxes and gratuity (which, technically, you can give 0% for)? I'm trying to understand how even with 20% gratuity and SF's 8.5% tax, how you could get anywhere close to 1.5.
> Amazon has items for less than $10, but most items with a price between $0.01-$9.99 have to sell for $10.00 for their free shipping economics to work. That's notwithstanding the fee that your license to buy, i.e. Prime, cost you.
Amazon actually now will give you a longer ETA on cheap items to make it more affordable for them.
Is this anything other than taxes and gratuity (which, technically, you can give 0% for)? I'm trying to understand how even with 20% gratuity and SF's 8.5% tax, how you could get anywhere close to 1.5.
> Amazon has items for less than $10, but most items with a price between $0.01-$9.99 have to sell for $10.00 for their free shipping economics to work. That's notwithstanding the fee that your license to buy, i.e. Prime, cost you.
Amazon actually now will give you a longer ETA on cheap items to make it more affordable for them.
SF has a half dozen extra taxes that aren't listed on menus. It's not quite 1.5x bad but they aren't too far off.
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>> In San Francisco, if you sit down at a restaurant, take the written prices on the menu and multiply them by 1.5 to get what you'll actually be paying.
>Is this anything other than taxes and gratuity (which, technically, you can give 0% for)? I'm trying to understand how even with 20% gratuity and SF's 8.5% tax, how you could get anywhere close to 1.5.
It's mostly hyperbole. There's an additional 4-6% charge that's fairly common to see for "SF employer mandate" which is sort of BS in its own way, but that only gets you up to a bit over 1.3x.
>Is this anything other than taxes and gratuity (which, technically, you can give 0% for)? I'm trying to understand how even with 20% gratuity and SF's 8.5% tax, how you could get anywhere close to 1.5.
It's mostly hyperbole. There's an additional 4-6% charge that's fairly common to see for "SF employer mandate" which is sort of BS in its own way, but that only gets you up to a bit over 1.3x.
Ah, ok, similar to the service charge concept that's common around Seattle in lieu of tips.
I haven't been to the Bay in over a year, wasn't sure if something's changed since.
I haven't been to the Bay in over a year, wasn't sure if something's changed since.
Most restaurants have an additional percent charge to provide healthcare or other benefits to their workers.
> Further, in San Francisco, if you sign up for $40/mo fiber Internet, it's really $63.50.
$73.63 once your promotional price expires.
$73.63 once your promotional price expires.
Plus the router rental fee of $11 per month
I have RCN. Normally I would use my own modem. But, on the phone they told me the modem would be 5$ a month. Lo and behold, my bill reads:
>Modem fee: 5$ >Wifi fee: 6$
Really makes me love the company! /s
Fee fee fee
>Modem fee: 5$ >Wifi fee: 6$
Really makes me love the company! /s
Fee fee fee
Hm, mine says $9.50. Fiber vs DSL rental price?
I know I can return the router, but what I wish I could really "return" is the phone service that adds a ton of taxes.
I know I can return the router, but what I wish I could really "return" is the phone service that adds a ton of taxes.
What are the charges on internet in SF? The ITFA(internet tax freedom act) banned taxes or fees on internet service.
It's not "on holiday", but the one that always bugs me is inactive account fees from banks. Is my account increasing their expenses by being inactive? No, it's not. If anything, it's decreasing them. So why an inactive account fee? The most charitable interpretation I can give is "since you're not giving us a chance to make money on other fees, we'll make money this way". The worst interpretation is "since you're probably not paying much attention to this account, we're probably safe to rip you off".
There are non-trivial compliance costs with maintaining accounts, an inactive account can absolutely be a cost for a financial institution. Not to mention that the bank makes a spread on deposits, so an inactive account is generating compliance costs + not generating any revenue (not necessarily the fees).
> There are non-trivial compliance costs with maintaining accounts, an inactive account can absolutely be a cost for a financial institution.
Sure. But in terms of compliance costs, an active account costs just as much, and perhaps more (if there are compliance costs per transaction, not just per account).
> Not to mention that the bank makes a spread on deposits
They make a spread on money left in the account. But I can leave money in an inactive account, too, and they make just as much money on that.
Sure. But in terms of compliance costs, an active account costs just as much, and perhaps more (if there are compliance costs per transaction, not just per account).
> Not to mention that the bank makes a spread on deposits
They make a spread on money left in the account. But I can leave money in an inactive account, too, and they make just as much money on that.
I have not heard of inactive account fees on accounts with a significant amount held in them. Typically, they charge you for keeping too little in there, sometimes regardless of activity.
Edit:
I did a little research. Bank of America has no dormant account fee that I can find. SunTrust does[1]... but only for Florida accounts, for some unknown reason. This may be a jurisdictional thing.
[1] https://www.suntrust.com/content/dam/suntrust/us/en/personal... (page 6)
Edit:
I did a little research. Bank of America has no dormant account fee that I can find. SunTrust does[1]... but only for Florida accounts, for some unknown reason. This may be a jurisdictional thing.
[1] https://www.suntrust.com/content/dam/suntrust/us/en/personal... (page 6)
I don’t understand this in general. My bank in the Netherlands charges me a $5 fee per month and everything else is free. My bank in Japan doesn’t charge me anything, but if I make more than 3 transfers per month I pay around $2 per transfer.
That reminds me of the so-called "active member discounts" on UK pensions. They're exploitative fees imposed on savers who have gone several months without paying in. The government banned them in some cases, but in other cases they're still legal.
"From 6 April 2016, 'active member discounts' are banned. This means you are not allowed to charge the pots of non-contributing members more than you would have if they were active members contributing to the scheme. Employers are still permitted to pay charges on behalf of active members so long as the total charge level imposed is the same for contributing and non-contributing members. ...The ban applies to non-contributing members where at least one contribution for them has been made to your scheme on or after 6 April 2016. The contribution needs to have been made while they worked for the employer who is using the scheme to comply with their automatic enrolment duties." https://www.tpr.gov.uk/en/trustees/managing-dc-benefits/5-va...
"From 6 April 2016, 'active member discounts' are banned. This means you are not allowed to charge the pots of non-contributing members more than you would have if they were active members contributing to the scheme. Employers are still permitted to pay charges on behalf of active members so long as the total charge level imposed is the same for contributing and non-contributing members. ...The ban applies to non-contributing members where at least one contribution for them has been made to your scheme on or after 6 April 2016. The contribution needs to have been made while they worked for the employer who is using the scheme to comply with their automatic enrolment duties." https://www.tpr.gov.uk/en/trustees/managing-dc-benefits/5-va...
> It's not "on holiday", but the one that always bugs me is inactive account fees from banks. Is my account increasing their expenses by being inactive? No, it's not. If anything, it's decreasing them. So why an inactive account fee?
Something similar: fees for dormant prepaid card accounts.
My guess is that even though your funds provide some sort of float to the card issuer, it's still a liability on their books that they need to somehow manage.
Something similar: fees for dormant prepaid card accounts.
My guess is that even though your funds provide some sort of float to the card issuer, it's still a liability on their books that they need to somehow manage.
My bank charges these fees, however there is an out for automated withdrawals, so I have a few of my bank accounts transferring the same amount between each other.
These scams work because once you have made a reservation online, and have likely made other plans that depend on it, the service is now more valuable than what you agreed to pay for it.
Thing is, nobody has agreed to anything yet, so you have just signalled your willingness to commit to that anchor price when you show up, now at a disadvantage because you have no other plan or way to get to a competitor, and they can pile stuff on until your complaining causes them opportunity cost against screwing other people.
Making a decision takes effort and energy, meaning once you have done it, you have less if it to argue. Pretty much every online price for holiday or services I have seen has a %33 markup of "fees," "insurance," "deposits," above the sticker price.
When someone renegs on a deal or tries to add "what about this one last thing," once you've committed, leave.
Thing is, nobody has agreed to anything yet, so you have just signalled your willingness to commit to that anchor price when you show up, now at a disadvantage because you have no other plan or way to get to a competitor, and they can pile stuff on until your complaining causes them opportunity cost against screwing other people.
Making a decision takes effort and energy, meaning once you have done it, you have less if it to argue. Pretty much every online price for holiday or services I have seen has a %33 markup of "fees," "insurance," "deposits," above the sticker price.
When someone renegs on a deal or tries to add "what about this one last thing," once you've committed, leave.
My experience with this was trying to get my dad, who basically doesn't use his phone, to a cheaper phone plan. He was on Verizon and paying $60 a month but usually keeps his phone off. He didn't want to move to a different provider, so I looked at what cheaper options Verizon had and they offer a $35/month "Small" plan (this plan still is listed on their plans page but trying to "get started" with it sends you to a page to purchase a smartphone). We went in to the store and said we'd like to switch him to the small plan. She says, oh you're already on the small plan. But then why are we paying $60 a month? Oh, that's the $20/month line access fee, plus taxes, 911 fees, etc. But what the hell is a line access fee and how is that not just what the $35/month would be for? The sad thing is I wouldn't have even blinked if it had been just a few dollars a month even though that shouldn't be OK either.
I later got him to switch to PagePlus for under $30/month, but only after his phone broke. The line access fee is, admittedly, marked in small text beneath the actual price on their current website.
I later got him to switch to PagePlus for under $30/month, but only after his phone broke. The line access fee is, admittedly, marked in small text beneath the actual price on their current website.
Is a phone plan even necessary at this level of usage?
In much of the world, I'd just use a pay-as-you-call SIM, probably with it set to automatically top-up. The price of calls varies widely, I have one aimed at immigrants which charges €0.005/minute for some international calls but is expensive for local calls, but it's appropriate for "emergency" phone use.
In much of the world, I'd just use a pay-as-you-call SIM, probably with it set to automatically top-up. The price of calls varies widely, I have one aimed at immigrants which charges €0.005/minute for some international calls but is expensive for local calls, but it's appropriate for "emergency" phone use.
I recently booked a flight on Alaska Airlines that turned out to be their version of United's "basic economy". But somehow Alaska managed to avoid having an asterisk next to their flight listing in Google Flights (possibly because you can bring a carry-on bag, you just can't pick seats and are in the last boarding group — where you likely will be forced to gate-check your bag). United's "basic economy" flight had an asterisk, so I knew to avoid it.
After buying the ticket, I was offered the chance to actually be able to pick my seats, for $85 or so. I decided to do so, and was then taken to the seat map, which showed 3 middle seats available. What's the point of picking your seats if you have to pick between the 3 worst seats on the plane? And how did Alaska thread the needle so their ticket prices don't get flagged as being not-real-economy-tickets?
After buying the ticket, I was offered the chance to actually be able to pick my seats, for $85 or so. I decided to do so, and was then taken to the seat map, which showed 3 middle seats available. What's the point of picking your seats if you have to pick between the 3 worst seats on the plane? And how did Alaska thread the needle so their ticket prices don't get flagged as being not-real-economy-tickets?
There’s at least one dude whose job it is to thread that needle, and another dude who tries to prevent that.
Our economy is filled with jobs that effectively cancel eachother out.
Our economy is filled with jobs that effectively cancel eachother out.
Once on a family vacation to Florida, I found myself on a toll road with no toll booths. If you didn't have a toll transponder, they just took a picture of the license plate and billed you later.
I had rented the car in Georgia, so the transponder wasn't even an option. A couple of weeks later at home, I got a bill in the mail - $4 for the toll, and a $50 processing fee from the rental company. It had already been charged to my credit card.
I had rented the car in Georgia, so the transponder wasn't even an option. A couple of weeks later at home, I got a bill in the mail - $4 for the toll, and a $50 processing fee from the rental company. It had already been charged to my credit card.
In case this helps anyone: Most cashless toll roads have an option where you can go to a website within a couple days and pay the toll online by entering your license plate. If you do this, your rental car company shouldn't get a bill, and you will avoid paying the extra fees.
I agree that the processing fees charged by rental car companies are ridiculous, though. The per-day rental charge for toll passes (in addition to the tolls) is also ridiculously high.
I agree that the processing fees charged by rental car companies are ridiculous, though. The per-day rental charge for toll passes (in addition to the tolls) is also ridiculously high.
Golden gate bridge is like this as well. Except I got the time wrong. Congrats to Sixt who I think only charged me $8 for a fee.
This happened to me in Italy... i guess it was Avis? Not sure. They billed me 25E processing fee for providing to police my details, because apparently I got a parking ticket. Never got the ticket itself, either from Avis or from police.
The funny thing is that they managed to charge my card, although it was a debit card that had expired in the meanwhile, and the linked account had 0EUR on it (the bank gracefully paid them, then automatically converted money from my other accounts to cover for my now-negative account balance).
The funny thing is that they managed to charge my card, although it was a debit card that had expired in the meanwhile, and the linked account had 0EUR on it (the bank gracefully paid them, then automatically converted money from my other accounts to cover for my now-negative account balance).
I had that with Europcar and asked to see the infringement notice. They said they had shredded it after telling the govt it was me driving, so they couldn't give it to me. All part of their GDPR compliance allegedly. So even consumer protection laws can be used to screw you.
The credit card being expired means nothing, you have to completely leave said bank. Direct debit arrangements are even worse in this regard (see also: gym memberships).
The credit card being expired means nothing, you have to completely leave said bank. Direct debit arrangements are even worse in this regard (see also: gym memberships).
Yeah, with transponder fees sometimes they charge you weekly, even if you only use the transponder once. [1] In some places (e.g., the Golden Gate Bridge) there's no lane for manual payment so you pretty much have to have the transponder. I think there may be a way you can manually pay your toll online, but it's possible this has to be done in advance (and I know no one who has ever done it). Basically, you have to pay the rental car transponder fees in some places, and they're a cash cow for the rental car companies.
https://thepointsguy.com/news/dollar-overcharged-me-for-toll...
https://thepointsguy.com/news/dollar-overcharged-me-for-toll...
[deleted]
This is even worse in the era of "sort by price." That top spot is immensely coveted, so the competition and innovation is to get a lower sorting price, rather than competition and innovation in getting a lower true price.
Of course, if your competitors engage in tricks, you have to as well. Otherwise you're relegated to the bottom of the list where no one clicks.
The natural equilibrium sucks. What's the solution?
Of course, if your competitors engage in tricks, you have to as well. Otherwise you're relegated to the bottom of the list where no one clicks.
The natural equilibrium sucks. What's the solution?
The solution is regulation. Here in the EU I see very few of these dirty tricks I see Americans complaining about, because we have strong consumer protection laws.
Agreed. It’s mostly a non-issue in Australia too because of the law (which includes airline tickets) - https://www.accc.gov.au/consumers/prices-surcharges-receipts...
The solution is regulation. We should have a rule along the lines of "you can only be charged once for a service". Meaning, if you charge me for a car rental and I have successfully paid, then that's it. You can't then hold back the service because you need a second charge. Same thing with hotels. If I book my hotel on Expedia and pay the charge there, you cannot charge me again when I show up to check in.
I want to be able to define my own custom sort function:
* Ignore items that do not match what I searched for
* Ignore anything which is not in stock
* Ignore anything with less than 100 sales
* Ignore anything with less than 4 stars
* Ignore anything with too few negative comments
* Plus some kind of ignore filter for "leave us 5 stars and get a free charger"
* Ignore items that do not match what I searched for
* Ignore anything which is not in stock
* Ignore anything with less than 100 sales
* Ignore anything with less than 4 stars
* Ignore anything with too few negative comments
* Plus some kind of ignore filter for "leave us 5 stars and get a free charger"
This is called Multi-faceted Search and it is pretty common for high end goods (think boats and cars).
Car rentals. The dark pattern kings.
Rented an Avis car in france, It came damaged so we got the guy in the shop to sign off on the little car diagram.
Long story short, they charged us for the damage. It wasn't a ton (100$), but Avis "dispute resolution" didn't believe us despite the photos and the damage document.
There comes a point were you ask yourself, how much time I'm going to put into getting this money back.
The credit card company thankfully looked into and the charge was rejected, but the grief it causes.
Rented an Avis car in france, It came damaged so we got the guy in the shop to sign off on the little car diagram.
Long story short, they charged us for the damage. It wasn't a ton (100$), but Avis "dispute resolution" didn't believe us despite the photos and the damage document.
There comes a point were you ask yourself, how much time I'm going to put into getting this money back.
The credit card company thankfully looked into and the charge was rejected, but the grief it causes.
> There comes a point were you ask yourself, how much time I'm going to put into getting this money back.
Also the airbnb problem resolution.. the agent is getting paid to save the company money, so they'll dick around with you as long as it takes.
Maybe someone can make a "Fight-against-companies-as-a-service", but maybe that's the CC company's portfolio...
Also the airbnb problem resolution.. the agent is getting paid to save the company money, so they'll dick around with you as long as it takes.
Maybe someone can make a "Fight-against-companies-as-a-service", but maybe that's the CC company's portfolio...
So I can not speak highly enough about having an Amex Platinum for this crap. Call them, say this sucks, here is the reason why and they say yup, refund. In the case listed the extra 14.99 EURO they would have said, hum not listed up front, here is your refund and then told the car rental to take a swim. I have had a number of instances like this where I just said whatever to the company and after (returning car, airline fee, etc.) chatted to Amex and solved.
We got in to our Hawaii honeymoon at 10:30 pm, utterly exhausted and went to get the rental car. We had prebooked everything with an agency, but we had never traveled before, so we didn't know what to expect. They asked for $500 for insurance for the week. We felt sick, but we didn't know our options or what coverage we had, so we paid. We phoned our insurance agent the next morning, and realized we could drop a lot of that, so did the long drive back to the car rental place, but it was quite the eye opener. I'm still angry about it, and pretty sure even the reduced number was an absolute rip-off, but we just didn't know.
Combine that with the sudden resort fee we didn't know about until we got to the hotel, and we spent that first night and next morning wondering if we'd made a huge mistake.
Combine that with the sudden resort fee we didn't know about until we got to the hotel, and we spent that first night and next morning wondering if we'd made a huge mistake.
Cost of a pizza in a normal pizza restaurant in San Francisco: $18. (if not higher in some of the fancier places)
Oh, wait! We need to add:
1) sales tax (9.75%) = $1.75
2) tip (20%) = $3.60
3) S.F. Mandates (4 to 6% depending on restaurant, let's say 5%): $0.90
Total? $24.25, or roughly 35% higher. Unbelievable, and ridiculous.
I wish all restaurants would advertise the FINAL price.
Oh, wait! We need to add:
1) sales tax (9.75%) = $1.75
2) tip (20%) = $3.60
3) S.F. Mandates (4 to 6% depending on restaurant, let's say 5%): $0.90
Total? $24.25, or roughly 35% higher. Unbelievable, and ridiculous.
I wish all restaurants would advertise the FINAL price.
A $6 baseball ticket on StubHub becomes $10.41. The seller receives $5.10. So StubHub keeps more than half the total.
We shouldn't expect the companies to be "fair&transparent", especially given the documented evidence that it's unprofitable. It's really the job of the governments to impose fairness rules. E.g. in Europe you don't see prices without tax - I believe they're not legal.
In some parts of the EU, there are tourist taxes that are excluded from the quoted price. They have taken me by surprise when I paid in advance and had to make a payment just for the tourist tax.
>We shouldn't expect the companies to be "fair&transparent", especially given the documented evidence that it's unprofitable. It's really the job of the governments to impose fairness rules. E.g. in Europe you don't see prices without tax - I believe they're not legal.
Governments have little appetite to tackle any of this within the tourist industry. All the fleecing is just adding tax revenue by skimming it off people who don't live there and won't vote for you. It's perfect. As long as it never hits a point where it starts discouraging tourism nobody is going to care.
Governments have little appetite to tackle any of this within the tourist industry. All the fleecing is just adding tax revenue by skimming it off people who don't live there and won't vote for you. It's perfect. As long as it never hits a point where it starts discouraging tourism nobody is going to care.
> Why not offer a price with “no hidden extras”?
In addition to the problem the article highlights, there is also the mess that is human psychology.
JC Penney tried replacing random discounts with everyday low prices [1]. It backfired. Their shoppers wanted to play the irrational game. (My assumption is rational shoppers shopped elsewhere, but that's neither here nor there.)
[1] https://www.forbes.com/sites/panosmourdoukoutas/2013/09/27/a...
In addition to the problem the article highlights, there is also the mess that is human psychology.
JC Penney tried replacing random discounts with everyday low prices [1]. It backfired. Their shoppers wanted to play the irrational game. (My assumption is rational shoppers shopped elsewhere, but that's neither here nor there.)
[1] https://www.forbes.com/sites/panosmourdoukoutas/2013/09/27/a...
An interesting corollary to this is that 3/4 star hotels in major business centers can get away with charging $15 or $20 a day for wifi. This is because they know that a huge percentage of their travelers are on business, and putting all credit card charges through an expense reimbursement process, so they don't really care what it costs as if it were their own money.
Whereas 1/2/3 star hotels aimed at the tourist market, and even the cheapest freeway-adjacent motels like Super 8, mostly all have free wifi because if they don't, people paying out of their own pockets will go elsewhere.
Whereas 1/2/3 star hotels aimed at the tourist market, and even the cheapest freeway-adjacent motels like Super 8, mostly all have free wifi because if they don't, people paying out of their own pockets will go elsewhere.
>There is a subtler problem too, explored a few years ago by the economists Xavier Gabaix and David Laibson. Even if an advert proclaiming “no hidden charges” is credible, it is not necessarily profitable. The problem is that not all customers would find the promise appealing. Some would instead infer “if you are good at avoiding hidden charges, try one of our competitors, who will offer you a cheap deal in the vain hope of ripping you off”. The transparent company would attract the suckers without exploiting them; the sneaky company would be a magnet for the sophisticates, who might well then avoid the tricks. The advertisement would backfire.
Without some experiments backing this up, this argument sounds contrived and perhaps overthought.
I seriously doubt there are that many "sophisticates" who factor that into their decision, even less so, sophisticates who would consciously go for the "hidden charges" business with the idea that their savviness would help them avoid the charges.
In any case, the fix is simple: regulating hidden charges away with business destroying penalties.
If the rental companies face a law that they should make all charges known in advance of be shut down, they'll change their tune in unison, and there would be no "hidden charge" competitor advantage...
Without some experiments backing this up, this argument sounds contrived and perhaps overthought.
I seriously doubt there are that many "sophisticates" who factor that into their decision, even less so, sophisticates who would consciously go for the "hidden charges" business with the idea that their savviness would help them avoid the charges.
In any case, the fix is simple: regulating hidden charges away with business destroying penalties.
If the rental companies face a law that they should make all charges known in advance of be shut down, they'll change their tune in unison, and there would be no "hidden charge" competitor advantage...
Cell phone plans are the most annoying one for this; I remember at one point the advertised price for the plan I was on was $118 ($99 per line, plus $19 per additional line, I had 2 lines). The amount I actually payed was a bit over $165. The big 3 providers had different amounts of tacked-on fees and at one point I called up one of them to ask what my actual bill on a particular plan would be 3 times and got 3 different answers. This made it essentially impossible to price compare plans.
Europcar overcharged Tim Harford by €14.99? Europcar Barcelona recently tried to me charge me an extra €260! I had arrived at the airport, after booking online, and they wouldn't allow me to pay the rental deposit with a debit card. 'Company policy' to only accept credit cards. Unless I paid the extra €260.
This is nothing to do with subtle economics. It's extortion because you're in a foreign country and desperate. I think we are just talking about a very unethical company.
This is nothing to do with subtle economics. It's extortion because you're in a foreign country and desperate. I think we are just talking about a very unethical company.
I mean, not taking debit makes sense for them, to be fair.
With a credit card, they can place a $2,000 hold on your card. If you've only got $100 in your debit account, it makes it a lot harder for them to recoup costs if you damage the car, above all for someone international. The whole point of debit instead of credit is you can't spend more than you have (usually). Car rental is in a pretty unique category of purchase, to be honest, in that they're trusting you temporarily with equipment worth tens of thousands of dollars.
(Debit card holds do exist sometimes, but can be much more limited than credit card holds, and may have additional international restrictions.)
I've never heard of charging extra to allow it though. I guess they ran they numbers and calculated the actual additional risk they're exposed to?
With a credit card, they can place a $2,000 hold on your card. If you've only got $100 in your debit account, it makes it a lot harder for them to recoup costs if you damage the car, above all for someone international. The whole point of debit instead of credit is you can't spend more than you have (usually). Car rental is in a pretty unique category of purchase, to be honest, in that they're trusting you temporarily with equipment worth tens of thousands of dollars.
(Debit card holds do exist sometimes, but can be much more limited than credit card holds, and may have additional international restrictions.)
I've never heard of charging extra to allow it though. I guess they ran they numbers and calculated the actual additional risk they're exposed to?
I don't get it — why can't the car rental company mention beforehand that they're required to hold a ~$2,000 deposit on some sort of card, and that the renter should have this amount to cover it?
There are credit cards out there (e.g. student ones) with abysmally-low limits. And I can easily keep a hold of ~$2,000 on my Visa/Mastercard debit card, as long as I have that amount in my bank account.
There are credit cards out there (e.g. student ones) with abysmally-low limits. And I can easily keep a hold of ~$2,000 on my Visa/Mastercard debit card, as long as I have that amount in my bank account.
There could be a technical reason for it - some debit cards don’t allow the type of charge they’re trying to do (offline transaction, or something else that I’m not aware of). However, they can at least try it and see if it declines. If they try it and it fails it’s somewhat legitimate, if they don’t even want to try it it’s clearly malicious.
The deposit on credit card only thing seems quite common across the world.
Well, debit cards are not accepted anywhere for car rental (at least I don't know any counterexamples). $260 in this case are returned at the end of the rental term, it is just a (relatively recent) additional service from Europcar, allowing people with only the debit cards to rent cars nevertheless. (Disclosure: I use Europcar at Barcelona airport about 5-6 times per year; they have some quirks, but I wouldn't use the terms "extortion" and "unethical").
Well in this case at least this €260 was not going to be refunded. It was a one off charge. And I have rented many cars elsewhere in Europe using only a debit card.
OK, this is called "prohibitory pricing". As in, "we really really don't want your debit card, but if it is an emergency, here's an option. Still, please don't". I tried to rent a car with a debit card a few times, and it was simply not accepted everywhere I tried, (Europcar in Barcelona, Hertz in Geneva and Copenhagen, Avis in Geneva).
I've personally used a debit card (major bank, Visa logo) for Enterprise car rentals in the US. Perhaps this is either a Euro or Non-US problem?
They placed a $1 hold on the card. If memory serves, I've also done this with Hertz but to the tune of a $200 hold.
They placed a $1 hold on the card. If memory serves, I've also done this with Hertz but to the tune of a $200 hold.
In 2012 in Boston, Enterprise refused to deal with my (European) debit card. However, in general this is right: US standards of customer service are unreachable anywhere in the world, except probably Japan. To the US people expectations, customer service is simply nonexistent here. "And remember -- here in France, the customer is always _wrong_!"
Yes, I had a similar experience with Europcar - screw those guys, I've never dealt with them again.
What I don't understand is why governments don't just flat-out legislate about this. They actually have made steps in some narrow areas (like airline ticket pricing). But not in most areas.
Probably my least favorite is event ticketing, just because it's so shameless. And it isn't even a monopoly anymore. For example, my local concert venue recently advertised tickets to a concert at $35 each. After all the ticket fees and service fees and other mandatory unavoidable charges, two tickets ended up costing $100. The service provided for that extra $30, which was to a third-party ticketing company but not one of the giant ones, was, as far as I can tell, to print off a piece of cardboard and leave it at will call.
It boggles the mind.
Probably my least favorite is event ticketing, just because it's so shameless. And it isn't even a monopoly anymore. For example, my local concert venue recently advertised tickets to a concert at $35 each. After all the ticket fees and service fees and other mandatory unavoidable charges, two tickets ended up costing $100. The service provided for that extra $30, which was to a third-party ticketing company but not one of the giant ones, was, as far as I can tell, to print off a piece of cardboard and leave it at will call.
It boggles the mind.
Actually, I take it back. The answer is, of course, in Mancur Olson's The Logic of Collective Action---it's much easier for ripoff industries to organize politically than for consumers.
I just keep a long list of companies that have dubious business practices and then avoid them. Unfortunately in the aggregate the feedback loop is probably too slow to change behaviors, particularly
in an oligopolies with implicit fee-fixing.
Don't rent a car here in (northern) Europe, if you can avoid it.
Renting a car in the US is painless and pretty risk-free.
Renting a car in Europe is different. I've read multiple accounts of local aquantancies here arguing with car rental firms about minor scratches that US rental firms just wouldn't care about.
When I return a rented car in the US the overworked guy I return the car to seems to be happy as long as the car is at least mostly intact.
In Europe meanwhile, you should worry about the rental company looking for minute scratches and then charging absurd amounts for these.
I don't rent cars in Europe. (Not sure if this is a Scandinavian, Northern European or European thing.)
Renting a car in the US is painless and pretty risk-free.
Renting a car in Europe is different. I've read multiple accounts of local aquantancies here arguing with car rental firms about minor scratches that US rental firms just wouldn't care about.
When I return a rented car in the US the overworked guy I return the car to seems to be happy as long as the car is at least mostly intact.
In Europe meanwhile, you should worry about the rental company looking for minute scratches and then charging absurd amounts for these.
I don't rent cars in Europe. (Not sure if this is a Scandinavian, Northern European or European thing.)
I guess it’s because all these amounts are paid by insurance? Nobody ever pays the €1000 themselves, so nobody cares?
I think it is to force you to pay the full CDW fee, or face the $6000 charge. In North America it is common for people to have the hire car coverage option on their main car. So it becomes a fight between e.g. Hertz and a big insurance firm.
I can't pick up a car in Europe in less than an hour, have to check/photograph everything. I have an actual checklist.
I can't pick up a car in Europe in less than an hour, have to check/photograph everything. I have an actual checklist.
can you share the checklist for us who are curious?
It's just like the one the hire car companies use, front/right/rear/left elevation, roof, windscreen, tyres, side mirrors. Inside: seats, control knobs, petrol gauge, odometer, warning lights. Engine bay: water, washer fluid, oil cap.
The difference is that it's my checklist and I do it, taking the required time. Photographs of every panel. It is inspired by all the times I've been ripped off or they have tried to rip me off.
The difference is that it's my checklist and I do it, taking the required time. Photographs of every panel. It is inspired by all the times I've been ripped off or they have tried to rip me off.
There should be fines for opaque pricing.
There should be a website where you can report shenanigans.
There should be a website where you can report shenanigans.
The only honest car rental companies I've ever used were a family owned one in Romania and Sixt, I think, in Sydney. All the rest, in Europe, were essentially scams. Not surprised.
Which company did you use in Romania?
For bullshit charges, you can just call your credit card to dispute them, and chances are you'll get your money back. I'm sure Avis and Europcar have probably received a bunch similar complaints, so they may just be automatically approved.
Gaming the aggregator in order to appear high in the search? Who would have guessed!
This seems like a pretty weak example of being "ripped off." He's complaining about a 15 eur charge for a one-way car rental? One ways are notoriously expensive...that reservation was probably a few hundred dollars.
I don't think there's a more egregious rip off than mandatory "resort/destination fees" - a lot of hotels charge $40-50+/day extra on top of the stated room rate as a daily "fee" for the pleasure of using the gym or internet. Marriott is currently being sued in several states for these fees. Write about that if you want to discuss a "rip off" - not a 15 eur fee.
I don't think there's a more egregious rip off than mandatory "resort/destination fees" - a lot of hotels charge $40-50+/day extra on top of the stated room rate as a daily "fee" for the pleasure of using the gym or internet. Marriott is currently being sued in several states for these fees. Write about that if you want to discuss a "rip off" - not a 15 eur fee.
I think the modest fee allowed him to comment on perhaps being let off lightly in this case. Like, he paid 15 more than he'd expected, and while his partner was fuming, he was sorta thinking "well, coulda' been worse!"
So it might have been a reasonable device to use for expressing this dynamic.
So it might have been a reasonable device to use for expressing this dynamic.
Yeah and the really lame thing about the hotel situation is when browsing and comparing rates, they all show the rate without the inclusion of those "resort fees". Suddenly your $60 / night room is really double that at checkout.
At least (in my experience) hotels tend to charge those resort fees at the time of booking, instead of at the time of check-in.
Sorry, I didn't mean checkout as in checking out from the hotel. That was checkout from the booking site, when you're ready to enter in your billing details (shopping cart style) to pay for the room you just browsed on their site. The issue is the browsing experience on the main site and Google results shows $60 but at payment time it's really $100-150 because of non-avoidable resort fees and taxes.
It's one of those "dark patterns" that feels scammy.
It's one of those "dark patterns" that feels scammy.
Yeah, it's annoying, but it, at most wastes a few minutes of your time, when comparison shopping.
Compare it to getting off an airplane, arriving at the car rental kiosk to pick up your reservation, and discovering that your options consist of shelling out $100 in bullshit fees, in order to actually get your car - the car that you've placed a non-refundable reservation for.
(And even if you throw a fit, and get a refund, your only option is to go across the street, and eat a $150 markup on a same-day car rental, instead.)
Compare it to getting off an airplane, arriving at the car rental kiosk to pick up your reservation, and discovering that your options consist of shelling out $100 in bullshit fees, in order to actually get your car - the car that you've placed a non-refundable reservation for.
(And even if you throw a fit, and get a refund, your only option is to go across the street, and eat a $150 markup on a same-day car rental, instead.)
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Another example is the idea that some people get a better price because they jumped through arbitrary and non-cost affecting hoops. Things like coupon codes or buying on an arbitrary sale day.
The best customer is one that comes in and says "I want this item, I will pay a reasonable price right now and walk out a happy customer"... Instead we give the best price to those who waste sales people's time with negotiations and give the worst prices to those who dont first put in a bunch of work extract the information about the right price. We are increasing the total cost of our products by making the purchase filled with uncertainty (am I getting a good price?) and external costs (I searched 2 hours for a $5 coupon) .
I would propose this. If you're going to give a customer $5 off then give them all $5 off. If you cant give them all $5 off, then give none (maybe give them all $1 off?).