No one wants to pay for something they’re not going to use. Fortunately, one key trend in this new digitized economy is the rise of à la carte pricing, or different pricing based on different needs. Recently, Tinder announced that they were launching yet another premium, add-on service called “Super Boost,” which elevates your profile for lucky ladies (or gents) looking for a match. Now, consumers can choose the new feature or just stick with regular “Boost” (less money but fewer perks) or the good old free version. This proliferation of permutations isn’t limited to swiping right; it’s all over the economy. This bodes well for consumer choice and innovation—if the government can stay on the sidelines.
Innovation has certainly been uneven over the past few decades with decidedly more progress in the digital domain than the realm of “stuff” like cars, airplanes, and furniture (how many couch innovations have there been?). But, even outside of the world of streaming and the internet, the world of pricing products and services has become far more efficient and consumer-friendly. For example, back in the “heyday” of air travel in the 1960s and 1970s, basically no tiered pricing existed. With few exceptions, you either bought the best seat in the house or you didn’t board the plane. And that seat cost far more than it would ever cost today.
But once deregulation started in the 1980s, things began to change quickly. Distinctions such as first class, business class, and economy (now premium economy) class emerged, allowing different people with different needs and means access to different prices and experiences. All of a sudden, people who would’ve been priced out of air travel entirely a decade prior had the opportunity to fly “economy,” which wasn’t glamorous, but got the job done.
Pricing innovation and the rise of the low-cost, bare-bones flight experience has led domestic air travel prices per mile to decrease by more than a third over the past thirty years (despite rapidly escalating fuel costs for airlines). Despite the rise of à la carte in the air, many see the emergence of “cattle class” as greedy CEOs trying to squeeze more and more profit out of beleaguered travelers. Some lawmakers have even taken aim at baggage fees, which allow for further pricing options for passengers that travel light and carefully plan their packing.
Hostility toward no-frills airlines tickets is just one part of the war on à la carte choices raised by lawmakers and bureaucrats. Policymakers have also devoted their energies to....video games, where the rise of in-app purchases have allowed console games to stay at the same price level of $60 for more than a decade (falling prices when taking inflation into account). Legislation introduced in May by Sen. Josh Hawley (R-MO) would limit specific in-app purchases called “loot boxes,” the digital contents of which are a surprise until gamers shell out money for them.
Sen. Hawley and Sen. Maggie Hassan (D-NH), who pressured the Federal Trade Commission (FTC) into investigating these video game features, believe that digital purchases amount to “gambling” and no one should be able to pay for an enhanced gaming experience. Which would mean, of course, that video game producers would have little choice but to raise video game prices on everybody. In contrast, à la carte pricing has allowed a majority of gamers to enjoy better-quality games without having to shoulder exorbitant development costs. A popular game like Subway Surfers is free to download, but there are “loot boxes” to enhance the game. Buying “loot boxes” is not mandatory, it’s a choice.
Tiered pricing is all over the place. This is evidently terrifying to some elected officials in Washington, D.C., but consumers across the country are celebrating more choices and lower costs. From Tindering to video games to air travel, consumers can have their cake and eat it too, but only if they’re hungry enough to pay top dollar. We should be celebrating that revolution, not tethering it to unnecessary rules and investigations.