Knowing and Making

Ed Kless at Verasage presents an interesting retail pricing scenario and asks for suggestions . Best to read his post and look at the pictures before continuing, otherwise the following will not quite make sense. If you're reading offline, here is his summary of three racks in a clothes shop: The first offered two tee-shirts for $30 or $19.50 each. The second, right next to it offered two tee-shirts for $30, but no mention of individual price and the third rack had individual tee-shirts for $15 each. My thoughts: I've noticed recently that a few places which charge "$N for two" will happily sell you a single one for $N/2. If there's no price for the single item then I imagine this would be the default policy. I'd suggest that the existence of these two apparently redundant offers is metered price discrimination - capturing people with a higher willingness-to-pay by selling them an extra product rather than charging a higher unit price. The $30 vs $...

Ed Kless at VeraSage points out that BearingPoint has filed for Chapter 11 protection, wiping out shareholders equity. VeraSage campaigns for a switch from hourly-based to value pricing (mainly among accountants) and so Ed asks how BearingPoint could possibly have lost money on hourly contracts, unless most of its consultants were sitting around doing nothing for months on end. However, even though BearingPoint came out of KPMG, I doubt they were charging on an hourly rate for most projects. In my experience consulting and IT firms are much more likely to use fixed-price agreements than accountants. A number of such firms have made serious losses on these agreements in recent years - IT projects of course being notorious for going over budget. I would expect that this is the reason for BearingPoint's problems. While government IT projects used to be notorious for going over budget at the taxpayer's expense, they are now getting just as bad a reputation for causing losses on th...