<p>Kling's maxim: <a href="http://econlog.econlib.org/archives/2009/11/price_discrimin_2.html" rel="nofollow noreferrer">Price Discrimination Explains Everything</a></p>
<p>The sorts of customers that subscribe to the weekly subscription are not the sorts of people that subscribe weekly. How are they different? I have no idea.</p>
<p>Let me speculate on a few possibilities. The point of periodic sales is to find people with <a href="https://en.wikipedia.org/wiki/Willingness_to_pay" rel="nofollow noreferrer">low willingness to pay</a>. People who can't wait to buy will buy mostly at the non-sale price, while people who can wait will mostly pay the lower price. That explains why the firm should have a sale, but not why the sale should be structured this way.</p>
<p>To explain this sale, perhaps 4-week subscribers and annual subscribers are two different groups. For example, 4-week subscribers might be poorer, have more volatile income, or are less sure that they will like the game subscription. When there are populations like this, the seller wants to offer two prices if possible <a href="https://en.wikipedia.org/wiki/Price_discrimination" rel="nofollow noreferrer">to maximize profits</a>. But they can't directly in this case, because they don't know which customer is a member of which population. Instead, they want to offer a menu of prices, and a cadence of prices, that do this.</p>
<p>Perhaps people sign up for the best deal if the price is attractive but then stop paying attention. Initially, they offered a modest discount on the annual subscription to attract many customers from this population. Relatively few 4-week individuals bought at that price. But, having signed up most of the possible interested population of annual buyers, they would like to offer a lower price to attract 4-week individuals. If the enough annual subscribers are not paying attention, or the offer isn't available to existing customers, this might be profitable.</p>
<p>Of course, there might be some other criteria for splitting the customers this way. The idea is that when you see sales that offer a menu of products to different customers, and the prices of that menu vary over time, the most likely explanation is that the business is trying to maximize profits by conducting price discrimination, and using this behavior to try to prevent those with a high-willingness-to-pay from paying the same price as those with a low-willingness-to-pay.</p>

CC BY-SA 4.0
2024-12-16T03:00:48.907Z
2024-12-16T03:00:48.907Z
BKay
<p>My brother points out that <a href="https://i.sstatic.net/vE8e7io7.jpg" rel="nofollow noreferrer">this NYT discount offer</a> is wrong about which plan is best:</p>
<blockquote>
<p>60% or more off on your first year of games!<br />
<br>
<strike>\$3</strike> \$0.75 every 4 weeks<br />
<br>
<strike>\$30</strike> \$12 for 1 year (BEST OFFER)</p>
</blockquote>
<p>There are 13 groups of 4 weeks in a year. At the original price, this yields \$39 per 4 weeks vs. \$30 per year, which is a good yearly deal. At the discount price, however, it yields \$9.75 per 4 weeks vs. \$12 per year, a bad yearly deal.</p>
<p>On closer inspection, the problem arises because the discount is much heavier for the shorter-term plan: 75% off vs. 60% off. Presumably, the little &quot;BEST OFFER&quot; tag is applied before the discount.</p>
<p>Why would they discount the shorter-term plan more for this offer?</p>
<ul>
<li><p>Because it was more heavily overpriced before, thus they're equalizing their profit margins?</p>
</li>
<li><p>Because they hope people won't notice that the yearly plan is worse, while also committing to longer terms?</p>
</li>
<li><p>Because they hope you might stick around for more than a year and then benefit from the better plan?</p>
</li>
<li><p>Because they can't do math?</p>
</li>
<li><p>Some other reason that is evident to people who understand business?</p>
</li>
</ul>

<price>
Much better savings on shorter-term plan
Luke Sawczak
# Much better savings on shorter-term plan

(Asked by: username_0 on 2024-12-06)

My brother points out that [this NYT discount offer](https://i.sstatic.net/vE8e7io7.jpg) is wrong about which plan is best:

> 60% or more off on your first year of games!  
>   
> \$3 \$0.75 every 4 weeks

There are 13 groups of 4 weeks in a year. At the original price, this yields \$39 per 4 weeks vs. \$30 per year, which is a good yearly deal. At the discount price, however, it yields \$9.75 per 4 weeks vs. \$12 per year, a bad yearly deal.

On closer inspection, the problem arises because the discount is much heavier for the shorter-term plan: 75% off vs. 60% off. Presumably, the little "BEST OFFER" tag is applied before the discount.

Why would they discount the shorter-term plan more for this offer?

* Because it was more heavily overpriced before, thus they're equalizing their profit margins?
* Because they hope people won't notice that the yearly plan is worse, while also committing to longer terms?
* Because they hope you might stick around for more than a year and then benefit from the better plan?
* Because they can't do math?
* Some other reason that is evident to people who understand business?

**Tags:** price

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## 1 answers

### Answer by username_1 on 2024-12-16. Score: 1

Kling's maxim: [Price Discrimination Explains Everything](http://econlog.econlib.org/archives/2009/11/price_discrimin_2.html)

The sorts of customers that subscribe to the weekly subscription are not the sorts of people that subscribe weekly. How are they different? I have no idea.

Let me speculate on a few possibilities. The point of periodic sales is to find people with [low willingness to pay](https://en.wikipedia.org/wiki/Willingness_to_pay). People who can't wait to buy will buy mostly at the non-sale price, while people who can wait will mostly pay the lower price. That explains why the firm should have a sale, but not why the sale should be structured this way.

To explain this sale, perhaps 4-week subscribers and annual subscribers are two different groups. For example, 4-week subscribers might be poorer, have more volatile income, or are less sure that they will like the game subscription. When there are populations like this, the seller wants to offer two prices if possible [to maximize profits](https://en.wikipedia.org/wiki/Price_discrimination). But they can't directly in this case, because they don't know which customer is a member of which population. Instead, they want to offer a menu of prices, and a cadence of prices, that do this.

Perhaps people sign up for the best deal if the price is attractive but then stop paying attention. Initially, they offered a modest discount on the annual subscription to attract many customers from this population. Relatively few 4-week individuals bought at that price. But, having signed up most of the possible interested population of annual buyers, they would like to offer a lower price to attract 4-week individuals. If the enough annual subscribers are not paying attention, or the offer isn't available to existing customers, this might be profitable.

Of course, there might be some other criteria for splitting the customers this way. The idea is that when you see sales that offer a menu of products to different customers, and the prices of that menu vary over time, the most likely explanation is that the business is trying to maximize profits by conducting price discrimination, and using this behavior to try to prevent those with a high-willingness-to-pay from paying the same price as those with a low-willingness-to-pay.


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