Recently Amazon announced that they will offer Amazon Prime for a special discounted price for those on EBT cards:
EBT card holders get Amazon Prime for $5.99 per month: Prime Discounted Monthly Offering
Now, Amazon is a private business and they can do whatever they want to do with their pricing, but in some ways this seems like a dangerous precedent to set. Most things are priced based on the value of the good or service to the consumer, the number of competing sellers, the location where it is being sold, and other factors. As long as there is enough competition, the price of goods will drop to the point where the seller receives the minimum amount of profit needed to justify the effort of providing the good or product for sale.
By selling the same goods to different consumers at different prices, based on the life situation of the consumer rather than how they buy the goods (retail, online, with coupons, etc…) as is normally done, Amazon is changing the way things are priced. They are means testing their customers, which will inevitably result in customers who make more money paying a premium to cover the people who are making and paying less.
If Amazon is the only one who does this, it really won’t matter for the average consumer because the system will simply not work. If you go to Amazon and it costs $30 for a month of free shipping and videos because others are only paying $5.00 or even getting the service free, but then there is another service that offers the same service to everyone for $19.99, consumers with means can just switch to the lower cost service. As Amazon loses customers to the other service, they’ll need to increase the price they charge the remaining people paying full price or quit offering the discount. If they raise prices, that will chase more people off, until Amazon will be forced to change or cease to operate.
If other companies follow suit, however, that would set up a socialist system, where people pay according to their means and take according to their needs. Prices would rise for the people who had more since they would now be subsidizing those who made less. Because the goal in such a system is to produce the least amount possible, since producing more simply means you pay more. Plus, you “win” when you get more than you pay for in a Socialist system, but you “lose” when you provide more than you get. For examples of this, look at how people will avoid paying student loans back when possible, even choosing a low paying job to keep their income low rather than taking a better job and getting on the path to doing well.
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So what are your thoughts? Is this a great marketing idea that will just bring Amazon customers it wouldn’t have anyway? Do you think it is a great way to help the poor? Are you resentful that you need to pay full price while others get a discount for the same thing? Let me know your thoughts.
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Disclaimer: This blog is not meant to give financial planning or tax advice. It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.