Discrimination in prices may be next big trend in e-commerce

NEW YORK -- Conventional wisdom says the Internet gives consumers more power than ever.

After all, the Web is full of sites with product details and price comparisons that shed light on purchasing the previously inscrutable: mortgages, cars, insurance, airline tickets and the like. Priceline and eBay even let consumers proclaim the prices they want to pay.

But there's a darker side to the equation.

The Internet also gives sellers more information about consumers than ever before -- how many products they buy and when, perhaps even how many each can afford.

Eventually, two people might get the same pop-up ad for the same Zippo lighter, but one ad pitches them for $15 while another says they're $10.

That is known as price discrimination, and it's not necessarily bad. Economists say it can make producers more efficient and promote competition.

But even in an uncertain future one thing is sure: Consumers will hate it.

This vision of the Internet is the basis of a new analysis from Andrew Odlyzko, a former Bell Labs mathematician now at the University of Minnesota's Digital Technology Center.

Such price extremes might not be bad for consumers, because a competitor might try to undercut the Spielberg movie provider with a competing release that costs less.

But Odlyzko believes that price discrimination simply could make people feel bad. After all, in the airline example, the people in the $1,200 seats may think they were robbed, while people in the cheap seats might kick themselves for not pursuing an even better deal.

Mainly, he hopes the expectation of increased price discrimination will become more of a factor in economic models and discussions about privacy.

"The growth in price discrimination is just one factor involved in this evolution of our economy toward where the fight is really going to be -- about ownership or control of information," he said.