Super Saver Delivery - classic price discrimination?

I've just ordered a book from Amazon. I selected the Super Saver Delivery option, and Amazon informed me that I should expect this book before February 9th. Now, I'm not exactly a stranger to ordering books from Amazon. I spent in the region of £500 last year, and I'm very nearly 100% confident that I will receive this book before the end of the week (that's February 5 for those who are keeping track). Why does Amazon do this? The two delivery options "Super Saver Delivery" and "Standard Delivery" are, as far as I can tell, completely indistinguishable in terms of service. The only difference being that one pays something in the region of £2 per order for the latter, and nothing at all for the former.

I can think of several reasons why they would exaggerate times: it's a pleasant surprise when your book arrives before it is supposed to (but then why not claim that all deliveries will take "up to 2 weeks"; it also covers them in case delivery takes longer than they might expect (but, again, why not give an even more exaggerated time). I can also think of reasons why they might want to introduce a "second-class" delivery service, in order to justify charging for their "first class" service (ie, the normal delivery rates that one would expect them to charge anyway). Similar to the way that second class customers on trains are deliberately inconvenienced in order to make first class more attractive. However I don't think this is what's going on here.

I think Amazon is indulging in some good old-fashioned price discrimination. As I said earlier, I'm a pretty regular customer; I order something on the order of £50 worth of books a month. As such, I know how long it takes for my books to be delivered, and I'm not even vaguely tempted to press the "standard delivery" option when it comes to the payment page. I'm exactly the sort of person who is most price-sensitive when it comes to deliveries, and I'm in a position to know that I can get the same service more cheaply.

Contrast Dear Aunt Doris, who orders a book off Amazon once a year for her nephew's Christmas present. She needs to get her delivery when she wants it, and she has no idea that "standard delivery" is the same as "super saver delivery". I mean, why would it be? That would just be crazy, surely? So Dear Aunt Doris pays the extra £2 for her one book a year, because she's not the sort of person who gets the chance to notice that she's paying for exactly the same service she could have gotten for free.

This is almost textbook price discrimination. You charge a lower price for the same service to those customers who are most likely to go look elsewhere, and most likely to be in a position to know exactly how much the service is worth. It's fun noticing phenomena you've read about in books in real life. I vaguely wonder if this theory of Amazon delivery pricing is testable (well, it obviously is if you work for Amazon...) but either way, I'm fairly confident it explains what's going on.

What I'm reading now

Once upon a time, when the Sparknotes message boards still existed* they had one called "what we're reading now" where people were supposed to write ongoing reviews of the books they were currently reading. What always surprised me what the number of people who were reading one book at a time! So, here's a list of the books that I currently haven't finished, but do intend to finish (it's probably incomplete, as it only includes ones that are by the side of my bed right now).

A Week in December - Sebastian Faulks

One of those "small world" type novels, small snatches of the lives of a variety of people living in London in late 2007. Fairly well-observed, and it's probably going somewhere. I can't imagine feeling as much for the characters in this as I did for the characters in Birdsong, but you can't expect anyone to write Birdsong twice. One serious gripe: the kids have accounts on YourPlace where they get "jabbed" by their friends who can post messages on their "doormats"; there is a virtual world called Parallax where the inhabitants refer to the real word as TL and trade in Vajos; there's a major bank about to collapse called "Allied National" and the lead singer of Girls from Behind is one of the leads on a reality show called It's Madness. It's slightly jarring living in this parallel world... even Al Qaeda has been given a different name. This make suspension of disbelief slightly harder, and I've pretty much no idea why you would choose to do it.

The News Where You Are - Catherine O'Flynn

Another novel set in the modern world (for some reason that's the only sort of novel I've been able to get into lately). To be honest, I've only read the first dozen or so pages. Has a fairly light touch, and I think it'll be an easy-going distraction. I doubt very much it will be any more than that, but I'm willing to be surprised.

Bridge The Silver Way - David Silver

A collection of bridge stories. My favourite books of bridge stories are the Chthonic books by Daniel Kleinmann. Unfortunately, there are no more of them for me to read, so I'm trying some others. These are readable, but not spectacularly good. I wouldn't recommend them.

The Time Paradox - Philip Zimbardo

This has been in the pile for a while. It's a book about time by the guy who did the Stanford Prison Experiment, and who has since done a lot of work on the psychology of time. It seems interesting, and seems to agree with . I want to know the contents of this book, but for some reason am struggling to actually read it. Will get there eventually.

The 4-Hour Body - Tim Ferris

Having read the 4-hour work week, agreed with most of it and subsequently ignored the vast majority of its advice, I couldn't wait to get my hands on this one. Fully of various reasonably well-researched tips and tricks about diet, exercise, sleep, etc. A lot of the things in this actually seem more actionable without going to too much effort than those in his previous book. I'll no doubt be playing with a few of them over the next few months. If any of them seem interesting/worthwhile/dangerous I'll probably blog about them at some point.

God is Not Great - Christopher Hitchens

Got this for Christmas, have been dipping in and out of it recently. Hitchens intellect is scary, he's a proper old-school Oxford academic (I just looked up to check that he actually did go to Oxford - I've no idea if I'd ever known that for certain before, it just feels as though he did). It's fun to read just for the sheer amount of stuff the man knows - his impressive takedown of the idea that Kosher food laws are in some way hygiene-related is the last chapter I read. Basically, I'm just basking in erudition. I'm sure I'll learn a few things too.

Priceless - William Poundstone

Yet another popular book about behavioural psychology. Extremely well-written, refers to several experiments and theories that I've never heard of, and gives the best intuitive explanation of Prospect Theory I've ever seen. I have actually finished this book, but I keep dipping into it because it was, simply, the best book I've read on one of my favourite subjects. Well-written, well-explained, well-researched, the chapters are a nice length to dip in and out of. I'm trying to think of something I didn't like about this book, but I'm struggling. I sort of which I'd decided to give the books in this post star ratings, so I could give this 6 out of 5.

Causality - Judea Pearl

After I wrote my post on Simpson's Paradox on Less Wrong, I decided I really should learn more about the theory of causality that I casually reference at the end. Partly because I kinda feel I should, but also because it just seems awesome. It's actual mathematics though, not exactly bedtime reading, although it hasn't been too tough so far.

Expert Political Judgement - Philip Tetlock

Tetlock's study is pretty famous. He basically concludes that "foxes" do better at predicting political events than "hedgehogs". To quote wikipedia: foxes "draw on a wide variety of experiences and believe the world cannot be boiled down to a single idea" hedgehogs "view the world through the lens of a single defining idea". I'm not sure how much more there is to get out of reading the whole book than what I just wrote in the paragraph above, but I've started so I'll finish. I've also promised Jess a summary - does that count? Or do I need to do it more detail?

So, there you go. There are no doubt others lying around that aren't in this pile next to my laptop. The pile is usually about this big. I can't understand how some people can read one book at once - what do you do when you're not in the mood for that one? (I sometimes even struggle to decide on one book to take on the Tube...). If I remember, this may become an occasional series.

Deadweight Loss

I'm currently reading Joel Waldfogel's book "Scroogenomics". In it, he expands on some of the points made in his classic research paper "The Deadweight Loss of Christmas". The basic premise is that people (especially distant relatives) don't know what you want as well as you do, so any gifts they buy you are less desirable to you than anything you could have bought yourself with the money. He has plenty of facts and figures to back up this eminently plausible theory, and I think a serious point to make.

However, he does have at least one minor slip. In describing what deadweight loss is, he says the following:

If a dollar disappears from my pocket and appears in yours, it's a loss to me, but it's not a deadweight loss to society. If you take my dollar and destroy it lightling your Cohiba, then it's a deadweight loss.

This isn't quite right, for the simple reason that dollars only have purely symbolic value. Burning a dollar bill is a genuine loss of $1 to the burner, but can't possibly make society as a whole worse off... you can't eat money. So who benefits? As the wikipedia article on burning money explains, everyone. Burning a banknote has a (very) slightly deflationary effect, so makes all of the money in everyone else's pocket worth slightly more.

I first encountered this idea in Steve Lansburg's excellent Armchair economist, and it seems to be pretty standard fayre in economics literature, so how did Waldfogel miss it? Or did he think that burning money seemed more wasteful than any other genuine example of a deadweight loss, so sacrificed accuracy for impact?

The Big Questions

Stephen Landsburg's new book arrived this morning. So far, slightly disappointing if at least generally entertaining. He's definitely better at economics than philosophy. My favourite sentence thus far:

In one recent survey, 39% of New Yorkers said they would leave the city "if they could"! Every one of them was in New York on the day of the interview, so we know that at a minimum 39% of New Yorkers lie to pollsters.

Ok, that's two sentences, but it's classic Landsburg.