How You're Tricked Into Paying More When Shopping Online

Did you know the type of device you use for online shopping can affect the price of the product or service you buy? A team of researchers recently searched for pricing inconsistencies by taking an in-depth look at how several online retailers price their products.

The paper, "Measuring Price Discrimination and Steering on E-commerce Web Sites," was written by researchers and computer science professors at Northeastern University, and asks the question, "Do specific users trigger different prices?" But before we delve into the answer, we need to gain a better understanding of these online shopping tricks, also known as price discrimination and price steering.

What is price discrimination?

This paper points out that online shoppers may be setting themselves up for something called price discrimination; charging consumers different prices for the same product.

Why isn't this illegal? Well, for one it's very hard to track whether or not the complicated algorithms set up by many online retailers are being used during a user's specific search. Another reason is that it will also take away perks of setting different prices for different users. For example, have you ever used a student discount, member account or coupon to purchase something online? Well, technically this is a form of price discrimination -- although in this case, it works in your favor.

What is price steering?

The same research paper also looked at price steering -- or when a company manipulates the order of search results to highlight a certain product. My guess is that these companies want to highlight the more expensive products. Price steering is different from price discrimination because it doesn’t change the value of the product, only the order in which it shows up. For example, Orbitz was found to promote high-value hotels to Apple users.

Research conclusions

There is real-world data proving that retailers and travel sites committed price discrimination and steering by:

• Offering reduced prices on hotels to "members" (Orbitz and Cheaptickets)
• Steering a subset of users towards more expensive hotels (Expedia and Hotels.com)
• Personalizing search results towards users on mobile devices (Home Depot and Travelocity)
• Personalizing search results based on a user's history of purchases and clicks (Priceline)

Why you shouldn't freak out... yet

This study first caught my attention because of an article on Marketplace's blog. Blogger Dan Weissmann states, "The retailer may ask you for more money, or just show you an array of more expensive products, depending on what kind of machine you’re using, or whether you're logged into their website, or your browser. That’s the bad news from a recent paper by researchers at Northeastern University."

But, a closer look at the study showed that the issue was much more complicated than Weissmann's statement makes it out to be.

There are some pricing models which in fact gave better deals to customers. For example, Travelocity offers a slight break in hotel prices to customers searching on an iOS device. Unfortunately, it is hard to have a definitive conclusion on how or why this happens, because the study only focused on times when their statistical methods found an increase in pricing. Without measuring the alternative, a decrease in pricing, this paper presents a one-sided conclusion.

How to protect yourself

Unless you develop a highly specialized experiment, you probably won't be able to tell when price discrimination is happening to you because prices on these of sites fluctuate based on many factors. It's difficult to fight against price discrimination and price steering because the lack of tools and technology make it difficult to isolate when it's happening -- another thing the paper points out.

There are some things you can do to try to help your chances of getting the fairest price.

Set price alerts: One thing that may lower the price is showing hesitation. The retailer will see you aren't sold on the price and may try harder to get you to purchase. A lot of companies offer price alerts on their sites, but there are also specialized tools that will set out to find the best price for the product you are looking for. Check out sites like, Price!pinx.com, Gazaro.com or ShopItToMe.com.

Use incognito windows: A lot of browsers let you open an incognito window which means you are not being traced while you do your searches online. This will help avoid companies tracking your cookies to see what you're looking for. This feature is called "private" of Firefox, "private browsing" on Safari and "incognito" on Chrome.

Check different devices: This study showed that there could be a price difference related to the device you use. When making a more expensive purchase like flights or hotels, try using as many devices as are available to you to compare price. The staff at MyBankTracker also did our own investigating to see whether our browsing history affected the prices in airline flights.

Shop in-store: Yes, the whole point of online shopping is making your life more convenient. But if it's a purchase you can avoid making online, like clothing or toiletries, just pick those up next time you head to a brick-and-mortar store.

Do your research: If you don't want to give up the convenience of shopping online, you can call the actual retailer to see what the in-store price is. Weigh the in-store price against your willingness to get out of your pajamas, and you may shell out a little bit more.

Become a member: Some of the larger price inconsistencies were between members and non-members. Most of the time members received huge discounts and rewards for their loyalty to the companies. Most of the times, becoming a member is free of cost (you may have to deal with some annoying emails) and could end up saving you hundreds on your purchases.

Again, it is hard to fight against these pricing practices and the above methods may not necessarily make a large difference, but they can't hurt either.