NPR Money: The birth and death of the price tag.

I found a fascinating podcast at NPR Planet Money about the life of the price tag.  Apparently it has been a short one so far.

Link to: The NPR Podcast

Price tags were not common before the 1800s. NPR story says that the … “the price tag world we live in now is a bizarre aberration”

Once upon a time long long back, there was a haggler in each store who offered different prices to people based on what they looked like.

This is still the story in much of the not-so-western world. I was in Singapore last year and my hosts told me that I was being quoted the “foreigner price” for a Durian (an exotic local fruit).

Efficiency was the mother of the invention of the price tag. The haggler needed to know a lot. How much was paid for the item, how much different people are willing to pay. You couldn’t hire an unskilled person to do the job. So eliminating the role meant that¬† stores could scale and become a lot bigger and more efficient than smaller stores.

Now, the fact that sophisticated computer algorithms can do the job of the haggler is killing price tags. So, airlines use algorithms to quote prices because it improves profits. Amazon uses algorithms to price their goods. AirBnB uses Aerosolve to help their clients improve pricing.

Algorithms are taking on the role of the haggler.


Prices on AirBnB

Air B&B uses Aerosolve a machine learning platform to learn from past data and help people price their apartments correctly.

They have built models that are easy to interpret by using additive functions to model price.

The great article below explains how one might create dynamic pricing models.

Article on Aerosolve.

There is also a long list of companies that do pricing for real estate.