Thursday, November 15, 2007

Monopoly… BOO!

So I’m about ready to give an exam and question #5 deals with monopolies and cable companies. After calling several companies I’m pretty sure Comcast is the only internet service provider for my building. Comcast’s internet service is priced at over $50 a month, which is about twice as much as two other local area companies. However, they start you with a teaser rate of $22 for the first six months. There is no long term contract. I’m not sure I will pay $50 a month for internet, but $25 a month is fine. I’m wondering if in six months I can threaten to cancel my contract and get 6 more months of the teaser rate. For a couple hundred dollars I’m willing to try. It seems others have had luck with the same strategy (link).

I wonder if this is a backward form of price discrimination, where people less willing to bargain for a buck wind up paying more.

1 comment:

Game Theorist said...

An usual assumption is that more productive (and richer) people have a higher oppoortunity cost of time, so they would use that strategy less.

It would then be a more classic kind of price discrimation.

But of course, they are also probably more productive when using that strategy, so...