Harford The Undercover Economist CHapter 2

Summary
In chapter two of The Undercover Economist, Harford discusses the scarcity power that industries have  to make customers pay more.  One example that he uses is Costa Coffee. The Costa Coffee shop is conveniently located near the London Eye, one of England's most popular tourist spots. The owners of the shop overcharge their coffee because consumers are willing to pay it. Tourist especially are more susceptible to pay overpriced items so the company has the convince factor and perfect location.  However consumers have the overall power not to go to Costa Coffee, thus it doesn't give the company all of the scarcity power. Now they have to look at more strategies. The first strategy that Harford addresses is "unique target strategy" which is done when a company observes the individuals. The second, and more efficient strategy, is "group target strategy". Here the company will offer prices to different groups of people. The third and final strategy is called, self-incrimination, this is where companies sell products in different ways and locations. Super markets are using these strategies all time. They sell similar products with different brands, locations and prices and this allows the consumer to have control of some part of their shopping experience. Supermarkets also use tactic called price targeting to see if consumers will pay higher prices, they do this most often with organic foods.

Questions

Harford explains in the chapter supply and demand isn't the only reason why people pay high prices, some other reasons are for convenience and quality. Retailers are very aware of the factors of pricing. I personally have seen prices get marked up do to location. For example my family and I live in a middle class neighborhood and town so when we go to the local grocery store prices are a bit more than they are a town over that is know as less well off. So retailers know the location of where they can overprice customers. Some of the strategies that retailers used to determine who is or isn't price sensitive are unique target, group target and self incrimination. Unique targeting is when its altered to the individual, group targeting is when the group is focused on and self incrimination is when companies sell products that are similar but for different prices. According to Harford grocery basket from stores like Whole Foods or Wegmans are cheaper than stores like Aldo's and Tops because they have more options so more opportunity for cheaper products. Some strategies retailers are using to get consumers to shop at one store over others is by having sales, coupons, and location availability.