Price Discrimination and Fairness at Wal-Mart
John Tiemstra, Professor of Economics
Perspectives
April 2006

Elderly people board busses to Canada to buy prescription drugs for less than they are priced in the U.S. Savvy travelers use "hidden cities" and split tickets to qualify for lower airfares. Couch potatoes disconnect their TV cables every three months so they can qualify for "new subscriber" rates. Supermarket cashiers swipe their own "preferred customer" cards for consumers who "left their card at home." People think about hiring CPAs to figure out what telephone plan will be the best deal for them. Workers boycott Wal-Mart for driving down the prices their employers can charge for goods, leading to demands for wage concessions. These behaviors can be understood simply as people gaming the system for their own advantage. I think, though, that they are more usefully understood as popular resistance to pricing policies that consumers view as unfair and unjust. Economists define "price discrimination" as differences in prices charged to different customers that are not based on differences in the costs of serving those customers. (There is no particular reference to race or sex discrimination here.) As price discrimination has become an increasingly common business practice, this popular resistance has grown. It is time for a discussion of the ethics of price discrimination.

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