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on a handful of products we know well. On another occasion, Everlane decided to clear clothing and shoe inventory by giving customers three choices of what to pay. He complained to Overstock, which offered to refund him the cost of the furniture. And it would open the way for retailers and economists to grab their holy grail. Hariharan talked wistfully of the days when hed walk into RadioShack and have a salesperson direct him to the exact connector cable he needed. He says these sorts of price experiments have become a routine part of finding that right priceand refinding it, because the right price can change by the day or even by the hour. Was losing some of its sheen.

Grocers have recognized this for decades, which is why they keep the price of eggs and milk consistently low, making their profits on other goods whose markups we dont notice as easily. But the bankruptcies all clustered within a band where online sales hit between 20 and 25 percent. Netflix was not doing any of this; it hadnt even provided Shiller with the data he used (which he obtained from a third party).

To be as addicted to sales as possible. But in the 1990s, the internet began to erode the terms of the long peace. But if Netflix also used peoples web-browsing historythe percentage of web use on Tuesdays, the number of visits to m, and some 5,000 other variablesit could boost its profits.6 percent. Varian agreed to spend a sabbatical year at Google, figuring hed write a book about the start-up experience. And if I know the reaction to me, what is my first, best move? It may come as a surprise that, in buying a seasonal pie ingredient, you might be participating in a carefully designed social-science experiment. It just started vibrating between two quantum states. This would amount to a rejection of the new truce that Everlane is extending. EBay was Disneyland, says Steve Tadelis, a Berkeley economist who went to work there for a time in 2011 and is currently on leave at Amazon. But thats not the end of the story.

Then economists realized that they could go a step further and design experiments that produced data. Org, seems like a whole lot of work. The software identifies the goods that loom largest in consumers perception and keeps their prices carefully in line with competitors prices, if not lower. But demographics are actually a crude way of personalizing prices, the Brandeis economist Benjamin Shiller argued in a recent paper, First-Degree Price Discrimination Using Big Data. Varian, however, was immediately invited to look at a Google project that (he recalls Schmidt telling him) might make us a little money: the auction system that became Google AdWords.

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