60% Off!!! Retailer Deception, Consumer Irrationality, or Both?

business_ethics_highlights_2This piece on retailers’ price discounting practices could be a good classroom conversation starter on ethics in sales, deception in bargaining and negotiation, and the like. Three quick observations:

(1) There is a distinction to be made between an action that impairs the ability of a consumer to make a rational decision and an action that takes advantage of a pre-existing propensity in a consumer to reason in an irrational manner. (On which side of that distinction do the complained-of pricing practices fall? Is there a moral distinction between practices falling on one side and practices falling on the other?)

(2) The journalist suggests that the complained-of practices constitute a bait-and-switch. (Is this a bait-and-switch? Does it possess the features that make bait-and-switch practices morally objectionable?)

(3) The advice for consumers at the end of the article is good. The important relationship is between the price offered to you and your reservation price (the highest price that you’re willing to pay for the product), not between the price offered to you and and a real or imagined “standard” price. As long as you know your reservation price, and the retailer delivers the product promised, you can never be harmed by purchasing a product at or below your reservation price. >>>

LINK: Why 40% Off Doesn’t Mean What You Think It Does (by Sapna Maheshwari for BuzzFeed News)

Chains from Kohl’s to Nordstrom Rack have been fighting a massive wave of class-action lawsuits in the past few years questioning just how legitimate their discounts really are. …

The suits claim there’s a bait and switch going on: You walk into a store, see a jacket on sale for 40% off, and buy it based on what a great deal is it. But it turns out the jacket was never sold at that original price. …

Such tactics, known as “high-low pricing” and “price anchoring,” have become easy ways for retailers to attract value-conscious consumers, especially in a sluggish economy. …

While a number of the attempted class-action lawsuits have been quickly dismissed and the fairness of payouts hotly debated, retailers’ defenses illustrate how convoluted the notion of a “regular price” has become.

What You Can Do as a Consumer … Research what you’re buying at full price or outlet stores, and ask associates. Take the amount of a discount and “compare at” prices with a grain of salt, unless you’re absolutely positive about a product’s typical cost. Pay $40 if you believe a sweater is actually worth $40.

What do you think?

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