The vision of a free market with an invisible hand taking care of social benefits and public well-being serves as one of the dimensions of capitalism as an ideology. For its achievement, the market should adhere to specific conditions and be competition-based and economically unbiased. However, there are numerous barriers in the way of the economic utopia, such as firm collusion and price discrimination. In short, they create an environment where common consumers have a strictly unfavorable position in the market.
Ideally, a free market implies a state of competition between the firms where the goods’ price is based on a supply and demand relationship. Unfortunately, the actual situation might not always resemble the expected behavior. Sometimes, firms might collude in an agreement to align prices, setting them up in a more profitable way. These collusion practices are not legal – any attempts to fix prices might lead to prosecution from law enforcement. Nevertheless, the ever-increasing speed of technological advances might have a negative influence on the contemporary status quo. Modern technologies already allow the creation of unique pricing algorithms; when these algorithms become sophisticated enough, they might be able to manipulate the market without people even realizing it.
In the case of the opposite market situation, firms adapt price algorithms unilaterally to maximize profit. Consequently, there will be no uniform price for highly differentiated products – firms will limit price transparency and attempt to make the prices “unique.” If this uniqueness is put concerning people (consumers), it might lead to discrimination. Generally speaking, discrimination is a special attitude toward an individual or a group of individuals because of various prejudices, preferences, or other artificial barriers. In the context of pricing policies, however, discrimination changes and can be described as the establishment of different prices for people based on their characteristics and personal information.
Despite the two mentioned cases implying an opposite market state, they share commonalities. Collusion will result in firms collectively setting higher prices (similar to contemporary cartel agreements). Thus, people will find themselves choosing the lesser of “the evils” since there will be no supply of “goods” on the market. In turn, price discrimination will cause increased market personalization. People will be offered prices based on a firm’s estimate of how much they are willing to pay for their products. For example, even nowadays, the commercials people see online differ from those that see others from their environment. Ultimately, in both cases, only the suppliers benefit from the market, while consumers are left with almost no choice but to buy products for unfair prices.
Firm collusion and price discrimination represent practices detrimental to the consumers and a free market. In the former case, firms increase the terms of sale transparency to coordinate market prices. In the latter case, firms limit price transparency and pursue market personalization to dynamically adjust prices based on the consumers’ estimated solvency. These unpleasant perspectives are similar in how they eliminate the chance for consumers to get a fair deal.