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Thus, Tesla must find some characteristic of buyers that is correlated with high willingness-to-pay and charge more to customers with that characteristic. Airlines, for example, price more for the same seat if you book at the last minute on the theory that last minute buyers are probably business-people with high willingness-to-pay as opposed to vacationers who have more options and a lower willingness-to-pay.

Tesla uses a slightly different strategy; it offers two versions of the same good, the low and high mileage versions, and it prices the high-mileage version considerably higher on the theory that buyers willing to pay for more mileage are also more likely to be high willingness-to-pay buyers in general. Thus, the high-mileage group pay a higher price-to-cost margin than the low-mileage group. Manufacturers may intentionally damage a portion of their goods in order to price discriminate.

Many instances of this phenomenon are observed.

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It may result in a Pareto improvement. Note the last sentence—damaging goods can be beneficial to everyone! Unfortunately, I fear that Tesla may have made a marketing faux-pas. Alex Tabarrok Email Alex Follow atabarrok. Tyler Cowen Email Tyler Follow tylercowen.


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damaged goods

Test your vocabulary with our question quiz! Build a city of skyscrapers—one synonym at a time. Definition of damaged goods. First Known Use of damaged goods , in the meaning defined above.

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Statistics for damaged goods Look-up Popularity. Time Traveler for damaged goods The first known use of damaged goods was in See more words from the same year.