Study Shows Online Price Discrimination is a Reality
Online Price Discrimination has long been a rumor and something that many people suspected to be true. Now, thanks to a new study by Northwestern University, there may just be proof that price discrimination is a reality. Researchers discovered that prices quoted on some retail websites and travel websites tend to differ based on your particular internet search history and the device on which you are searching. They found that some sites, such as Travelocity and Home Depot, gave different results to different customers even if they used exactly the same search terms.
For example, on Travelocity regular users were charged $633 a night for a particular hotel in Paris, but when the researchers created fake user accounts controlling such variables as operating system, cookies, purchase history, and browser history, they recieved a result of $565 a night. That’s a $70 difference which most people would consider to be very significant. Consumer advocate Edward Dworsky believed this price discrimination is based on the data that search engines collect.
“Some say it’s part of big data, that they have a profile of people that they are marketing to and they are going to try and hit the sweet spot and offer you a product at the price they think you’re going to buy,” he said.
There are other websites employing similar tactics. The full breakdown of what the researchers found is listed below.
- Cheaptickets and Orbitz implement price discrimination by offering reduced prices on hotels to “members”.
- Expedia and Orbitz engage in A/B testing that steers a subset of users towards more expensive hotel rooms.
- Home Depot and Travelocity both personalize search results for users on Android and iOS devices.
- Priceline personalizes search results based on a user’s history of clicks and purchases on the site.
It’s clear that price discrimination does exist, and now the only obstacle is to find a way to overcome it. That may take time, but at least knowing what these sites do may give customers a little insight so that they won’t be fooled into thinking they’ve found a better price just because the website says so.