Capturing the consumer surplus

I know next to nothing about economics. Let me make that clear up front. So I get fascinated by what I’m sure are very basic concepts. In his recent article Camels and Rubber Duckies, Joel Spolsky talks about “consumer surplus,” which he describes as “the extra value that those rich consumers got from their purchase that they would have been perfectly happy to do without.” He says that “capitalists want to capture the consumer surplus” by trying to make customers who can afford it pay more for the exact same product than those who can’t.

I got a first-hand account of this today. Yesterday, our car was involved in an accident, and is in the service shop getting fixed up. My insurance company pays for a rental car, so this morning I went to Hertz to get one. The agent there informed me that my insurance would pay for a compact car, but they were running a promotion where if I paid extra, I could get my choice of car. I said I was happy with the compact car. After consulting the computer, he told me that for only $5 more per day, I could rent a Nissan Altima, which was a nice big full-size car. I told him I wasn’t interested, and he went out to get the car my insurance would cover. When he came back in and handed me the keys, he told me he was upgrading me to the Altima free of charge.

It’s obvious to me that the Altima was the cheapest car he had on the lot, and he was going to have to rent it to me even at the compact-car rate. I’m not sure whether to be annoyed at the sleazy sales tactics, or to admire the gusto with which he tried to get me to pay more for the exact same car I was going to get anyway.

6 thoughts on “Capturing the consumer surplus

  1. Heh. I suddenly feel enlightened: Five years ago, when Suzanne and I were moving in, we went to buy a new mattress set. The mattress set came with a cheap metal bed frame, and as we were finalizing the deal, the salesman offered us an upgrade to a “heavy-duty” bed frame for $20 or something like that. I declined, and he later gave us the heavy-duty upgrade for free. Now I know why!

  2. Alexi, I think you should be more annoyed than admiring the sleezeball. I
    wonder how many others that were not as sharp as you, have been taken for a ride
    and paid more. Regarding Brooks comment, I just read a
    where they say the average person spends over 30% of their lives on
    a mattress. Had he ended up with the cheaper bed frame he could have spent a
    long time sleeping on a bum deal.

  3. Ha, that is pretty irritating. I am sure it’s what most of the salesmen at the big car rental companies are taught to do though.

  4. I agree with you, from a sales point of view that is a really clever trick and i am betting that out of 10 people he would of got at least 6-7 of them to pay the extra, but i think its totally wrong and i would of been very irritated if they had tried that trick on me. Well done for sticking to your guns and saying no, i bet they asked you quite a few times also.

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