In the small, yes, but I believe there are innovations still undiscovered that will allow retailers to replace the areas roughly approximated by multiple price points with a model which captures the entire consumer surplus. Think about the advantages a retailer would have over competitors if they could capture the entire consumer surplus. It would be incredible.
>Think about the advantages a retailer would have over competitors if they could capture the entire consumer surplus. It would be incredible.
Not really. Even if they know exactly how much you can/are willing to pay, that's useless if the store next door is undercutting their pricing. Grocery stores are a relatively competitive industry with razor thin margins, so being able to "capture the entire consumer surplus" seems doubtful.
Undercutting doesn't really address the area below the demand curve, but above the equilibrium point. You can draw out the supply and demand curves of the undercutting scenario you're describing and see for yourself.
HN doesn't support charts, but here's a snippet from wikipedia:
>Consumer surplus, or consumers' surplus, is the monetary gain obtained by consumers because they are able to purchase a product for a price that is less than the highest price that they would be willing to pay.
Sure, producers can claim that surplus by charging more (up to the willingness the consumer is willing to pay), but if there's a competitor that isn't doing this, then the consumer will switch to the competitor and keep their surplus.
I don't disagree that's the case when a producer sells at a single price. Their revenue is the the rectangle formed under the demand curve[1] bounded by price * quantity.
What I'm saying is that having a single price means that consumer surplus is left on the table and that charging each consumer exactly what they'll pay for the good will capture that surplus. It will essentially "fill in" the space not captured by the revenue rectangle.
In microeconomics this is called first-degree or perfect price discrimination[2].
We see the kind of thing you're describing in a market like housing, but it only shows up there because of a strange combination of a) we live in a democracy and b) blocking new housing supply in desirable areas is hugely politically popular among multiple classes of people who vote. We don't see it in the grocery business, where even modest price increases like we've seen recently (that are mostly covering real costs) are hugely unpopular and drive people to the already numerous competitors very easily, and on top of that startup costs for grocery businesses aren't all that high so moats are very shallow for existing entrants.
We do see attempts at price discrimination in haggling and negotiations, but this is stereo-typically a human-human interaction rather than one mediated by predictive analytics.
Theoretically there are margins to be gained by identifying customers, retrieving their personal financial information, predicting the price they would be "just" willing to buy for that's still above the equilibrium price of the good, and doing this at scale and automatically.
I think a grocers could absolutely do the online ordering and pickup/delivery space where prices could be tailored to individual consumers and there was market dominance.
Sorry, I don't have the data to give a figure. I'd have to build the model, and have a complete transaction record dataset.
