Is it moral to sell an identical but more expensive product?

Work, Careers and Money
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Is it moral to sell a product or service when you know your customer could get it somewhere else for less? (Let’s assume that you also know that the competitor selling the product for less is able to do so in a way that he can sustain indefinitely.) The transaction between you and the customer would be by mutual consent to mutual profit (and thus win-win), but it would not be in the customer’s best interest. Here’s a hypothetical: imagine that your customer is a mentally disabled person on a low income who knows he would benefit from an expensive software program you are offering and yet who doesn’t know that the software is GPL-licensed and thus available for free elsewhere.

 

I think that I would feel ashamed if I were able to win customers with an identical but more expensive product (which I might do with better marketing).

 

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1.  My product is NOT identical to the GPL-licensed software.  If my competition includes freeware, I have made sure that mine is better, otherwise in the market I would fail.

 

2.  According to Objectivism the standard of morality is my “life”, but it is to be looked at rationally - i.e. a morality of rational self-interest.  This necessarily means taking into account all consequences over the long term.  a) It is not in my rational self-interest to “deal” with mentally disabled persons who do not have the capacity to trade as independent rational men, and whose incapacity are no fault of their own.  My interest is better served speaking with a trustee or guardian:  outlining why my product is better than the “free” product offered by the competition, and why my product will be a benefit to the mentally disabled person.

 

3.  Feelings are not a guide to action.  Especially if they stem from an improper epistemology or incorrect morality, such as altruism.  They are guides to your implicitly and possibly subconsciously held premises… and to the degree you can trust them, and only to that degree, emotions can prove a useful first impression. 

 

4.  If a fully rational adult chooses to buy my program (which I know is better because I had to make it better), I have no “duty” to inquire whether or not they have considered my competition’s product, nor is it moral to do so, unless I believe in the long run it will benefit me. (for example if I have a line of product which do not have free counterparts and which I believe I would have a better chance of selling if I tell the fellow not to buy my program for which there is a similar free product on the market).. 

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1 doesn’t seem relevant. The hypothetical explicitly says the product is identical, meaning there is nothing in fact better. If the product is identical, but there is some sort of convenience, that would be different, as there is some advantage. Here, it’s a product that is identical, and the seller is offering no discernible difference.

I agree on 2, so that’s a good reason to say the seller is being immoral. There is no value-for-value trade. The trade is based on attempting to seek out ignorance in others, the intention in this hypothetical is not at all offering one’s own best work or even mental productivity. The moral evaluation requires understanding of both intention and consequence. It’s not wrong to profit from a person’s decision that you wouldn’t advise, while it would be wrong to intentionally offer a product and hope someone doesn’t notice that the product sucks or is in no way different except being overpriced.

An admirable, virtuous person wouldn’t aim to sell a product by barely showing what differentiates the product. They’d make aim to sell a product because they truly believe the product is valuable and would be worth a trade. So, in this hypothetical, I’d say definitely immoral.

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The “hypothetical” has premises (some implied) which when integrated as a whole are not internally realistic or non-contradictory, which is often the case when hypotheticals are contrived:

 

1.  The software program being sold for money is “expensive”.

2.  An alternative is being offered for free under GNU.

3.  By implication, neither of these was produced via piracy of direct duplication of the other.

4.  Somehow each of these two products are simultaneously able to exist in the market, one being given away for free the other being expensive

5.  These two products are claimed to be identical.

 

5 is impossible (strictly speaking) if 3 is true.

1, 2, and 4, together is not a possible realistic situation even if 3 were false and 5 were true.

 

When confronted with clear inconsistencies and impossibilities one must, in order to make the hypothetical make ANY sense, make some adjustments which minimally affect the number and nature of claims so that a consistent realistic non-contradictory whole story can be maintained.  Clearly 5 is the one we must ignore for consistency as it is the least realistic and inconsistent when integrating the whole.

 

Louie, you cant let a hypothetical lead you around by the nose; step back and think about it.  if it is silly but you still want to address it, it is perfectly valid to remove the silliness.

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if it is silly but you still want to address it, it is perfectly valid to remove the silliness.

Was pretty sensible and easy to answer for me. It’s not a crazy scenario, I mean, the key point here is that someone who wants to attain a value by means of avoiding any need to make a better product or strive for the best is being irrational.

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The original question mixes two quite different issues.  If your potential customer is incompetent - psychiatrically impaired (your example), underage, brain-damaged - then taking his money in a deal he isn’t qualified to make is reprehensible whether or not you’re matching the best available price.  Such a deal is unlikely to stand up legally, and this customer’s parent or custodian should have been paying attention.

 

Without this special circumstance, your customer was free to shop around.  Instead he outsourced the job to you.  Economics calls this practice (charging different prices in different circumstances) with the concept of elasticity of demand.  The shopper who spends hours a day searching newspapers, junk mail and the web looking for bargains will probably spend less money than the shopper who decides he has better things to do with his time.  A flight from one airport to another is the “same” product if you buy it a month in advance to fly in February as if you buy it two days in advance to fly in the week before Christmas, but you pay much more for the latter.  A restaurant may sell a given meal at any hour, but it’s more expensive at night than at lunchtime.  And so on.  Value is a relational term.  It’s value to a particular buyer in a particular set of circumstances, not an intrinsic property of the good or service.

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When confronted with clear inconsistencies and impossibilities one must, in order to make the hypothetical make ANY sense, make some adjustments which minimally affect the number and nature of claims so that a consistent realistic non-contradictory whole story can be maintained.  Clearly 5 is the one we must ignore for consistency as it is the least realistic and inconsistent when integrating the whole.

The ethics of emergency tries to upend an ethical principle by framing in a no-win scenario. Consider a lifeboat that can only carry four people when six are present. Consider a run-a-way rail car that will kill one person or many. (Why is it most of these scenarios are always focused on what you would decide for others what the outcome should be? Altruism? Isn’t ethics primarily concerned about the actions required for sustaining life, in particular in application to one’s own (under normal conditions)?)

 

The introduction of a mentally disabled person into the mix, as pointed out, disregards that they have a guardian, and that such a contract would not be upheld by a court of law. This would be an ethics of omitted consideration. An appeal to ignorance, if you will. It counts on your ignorance of how mentally disable folk are not emancipated agents in a free market.

 

The ethics of emergency is, in a way, an ethics of omitted consideration. It omits the consideration to which the field of ethics applies. It omits the consideration of the normal conditions under which the field of ethics applies.

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Thank you everyone for your answers. Thanks, Eiuol, for helping another to understand the question.

 

It was a mistake to introduce the disabled person; as I should’ve expected (and would’ve done myself, probably), you thought I meant that he was incapable of making a decision for himself, when what I really meant to do was introduce somebody who correctly “knows he would benefit” from the software but is easy to pity. Yes, StrictlyLogical, emotions can’t be blindly acted upon, though I find hypotheticals like this (which really could happen) make me think harder.

 

Eiuol, it is a value for value trade. The software really is a value to the person. (Maybe I created the confusion with the disabled person). “It’s not wrong to profit from a person’s decision that you wouldn’t advise, while it would be wrong to intentionally offer a product …[that]… is in no way different except being overpriced.” I think this is contradictory.

 

dream_weaver, I don’t see how this is a no-win scenario. The seller could stop selling the product if he thinks it’s wrong to do so, or (if he believes that the value he provides is convenience, as Reidy says) continue selling it and be happy that he’s saving people time. 

 

Reidy’s answer is the best one in my opinion. I just find it difficult to accept that a buyer and seller can trade, and both can benefit (and hence it’s a win-win), but the buyer is, say, in an emotional state that prevents him from looking around for just a second (because a loved one just died and he’s distressed or he’s really tired or something) to see that he would really benefit much more by going with a different seller. Why would an Objectivist promote win-win scenarios but then, after it’s established that both parties to a transaction win, throw up his hands and say that any difference in the amounts of benefit gained by the two sides after that is fair game?

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A person could say that we need to consider all of the consequences in the long term, as StrictlyLogical did, but the software seller in this case faces no long term negative consequences for, say, using good marketing tactics to repeatedly sell unnecessarily expensive products. 

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The no-win scenerio was only meant to be a description of the ethics of emergency.

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B12353 said:

Reidy’s answer is the best one in my opinion. I just find it difficult to accept that a buyer and seller can trade, and both can benefit (and hence it’s a win-win), but the buyer is, say, in an emotional state that prevents him from looking around for just a second (because a loved one just died and he’s distressed or he’s really tired or something) to see that he would really benefit much more by going with a different seller.

I agree, Reidy did a good job. Both parties won because both decided what value the trade had to them given their own circumstances. Their is no social responsibility to try and decide what the buyers context-hierarchy of values are. That the sellers values would lead them to do more research does not require them to extend this to the buyers context. A fisherman may know where to catch 200x the fish other fisherman average but that does not require them to lower prices 200x lower than the competition. Its the same principle.

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So many good ways of looking at it.  And the discovery of the disability issue being separate from the overall question.  I agree with several posters that Reidy got it right.  What many of you may not know is how instructive, civil, and interested in discovering truth the members of this site are, compared to the other sites I have worked with in the last several years.  I think it says something, that the general philosophy websites, whose posters get so angry if you introduce an idea from Ms. Rand can often, not have a civil discussion - while the website dedicated to their nemesis is such a friendly place.

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Eiuol, it is a value for value trade. The software really is a value to the person. (Maybe I created the confusion with the disabled person). “It’s not wrong to profit from a person’s decision that you wouldn’t advise, while it would be wrong to intentionally offer a product …[that]… is in no way different except being overpriced.” I think this is contradictory.

Yeah, but that’s not paraphrased right. I am saying if one’s frame of mind is to offer a product while hoping someone doesn’t notice that the product is not meaningfully different than another product except for being pricier, that’s immoral. If the price difference is for convenience, that’s fine, such as customer support or help setting up a product. The other posts address this part of your question well.

But the other part of your question is about what the seller is aiming to do, the motivation. The issue is offering a product and -hoping- someone doesn’t notice another product is better. A virtuous type of person wouldn’t need to worry and hope their customers won’t see the competition, they would be able to say their product is better or worthwhile for some reason. If their customers saw the competition, it wouldn’t be a threat. If a product is good, the competition is no issue, it’s good on its own grounds, and a product to be proud of. The long-term consequences are related to attitude and psychological state of oneself.

This comedy sketch has a similar idea to what you’re talking about.

https://www.youtube.com/watch?v=97ELhc-0bTg

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 I am saying if one’s frame of mind is to offer a product while hoping someone doesn’t notice that the product is not meaningfully different than another product except for being pricier, that’s immoral.

 

I will give you the benefit of the doubt you’ve thought this through. 

 

Please explain according to what standard it is “immoral” and rationally why/how the facts when taken in view of that standard lead you to conclude that it is “immoral”.

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I edited my post while you wrote that I think. I think what I added should answer your question.

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I edited my post while you wrote that I think. I think what I added should answer your question.

 

Someone who understands what morality IS could infer from your remarks what you mean.  But someone who has not yet discovered the standard of morality may completely misunderstand where you are coming from.

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In that case I’d emphasize how Objectivist morality isn’t about analyzing only some consequences to people or even oneself. It also isn’t only a set of rules to follow without worrying about what happens. Objectivist morality is about looking at the long-term consequences on oneself, and what frame of mind is required for happiness. So, a good starting point is to ask “what would a virtuous person do?” as opposed to “what’s the harm?”

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Ha ha. I found an example of something being for free in one place but for a price in another:

 

free: 

https://www.youtube.com/watch?v=XPSGMbqEGU0

 

not free: https://estore.aynrand.org/p/165/principled-leadership-mp3-download

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Just to get this out of the way, being dishonest is always immoral. Your example with the disabled person, and with selling GNU software, is an example of dishonesty (in fact taken separately, they would be two examples of dishonesty).

 

But, this original question, of what is an appropriate price for a product, I’d love to address in depth:

Is it moral to sell a product or service when you know your customer could get it somewhere else for less?

 I work as a freelance web designer and programmer. Sometimes, I charge an hourly rate or a fixed price for a given service, and let the client decide if my prices work for him or not. Simply because that’s what a lot of clients learned to expect, and they’re not willing to do things any other way.

 

But, whenever I can and I believe it is worth my time to do so, I prefer to instead have an in depth conversation with the customer about what he needs, and how much value he will get out of my services. And then, instead of calculating how many hours of my time the project will take, I charge a fraction of that estimated value.

 

The reason why this works better is because it prevents bad deals, on both sides. Most importantly, it prevents me from either under-selling or over-selling my services. If instead I just charged a fixed price, my only direct feedback on whether the price is correct would be either having too many clients, or not having enough of them. Either way, I’d be losing money because my pricing sucks. And second, it prevents the client from buying something that isn’t worth it for him. It’s not out of the ordinary for a client to realize, midway through the conversation, that he doesn’t need all the shiny toys and fancy features he thought he did. And then he’s happy that I didn’t just sell them to him and sent him the bill, the way someone who works with fixed prices would (because why would such a person care whether the client needs or doesn’t need his services? he gets paid either way).

 

And yes, this does mean that client A and client B, who both want a similar kind of product, could end up paying significantly different prices, simply because client A has a greater use for the product than client B. However, things do even out, in the long run. When client A and client B end up both needing me again, and I only have time for one of them, guess which one of them gets my limited time, and which one of them gets to go out browsing the wild prairie known as the online freelanced industry, and hope to find another competent programmer to help him out.

 

Ha ha. I found an example of something being for free in one place but for a price in another:

 

free: 

https://www.youtube.com/watch?v=XPSGMbqEGU0

 

not free: https://estore.aynrand.org/p/165/principled-leadership-mp3-download

That’s not the same product. One is streaming video, the other an mp3 available for download. Yes, you can rip youtube vids to mp3, but that is technically a violation of copyright law. Not that it would make a difference, even if that mp3 was available for free download on Notre Dame’s site.

 

ARI has a separate website, that provides a bandwidth they pay for, which allows these downloads. If they wish to charge a fee for all downloads, even ones that are available for free elsewhere, to pay for the site maintenance and bandwidth, that is fair. It’s a very similar example to how bottled spring water in your local convenience store is not the same product as water out of a spring in the woods, half way around the world.

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No, the ARI store example wasn’t fair because they’re not the same product. You’re right. I was trying to be funny but it wasn’t a good comparison. But then you go on to bring ARI’s costs (in site maintenance and bandwidth) into the picture. What if ARI more than covers its costs on identical products that are also available for free elsewhere and the convenience benefit to the user is (somehow) neglible? That’s the hypothetical we’ve been considering, and the convenience argument has already been addressed. (Why do ARI’s costs even matter? They don’t matter to the user. )

 

I explained above that the disabled person was cognizant of what he was getting, that he needed the software, and that I made him disabled just to encourage pity. Selling GNU software is also legal (though I believe you also have to make it available somewhere for free as well), and I don’t imagine you consider it my job to tell folks about my customers’ pricing plans. With these things in mind, I’m out of guesses as to why you think the disabled person example was dishonest. Unfair? That’s the question. But dishonest (in the narrow definition of the word)?

 

“If instead I just charged a fixed price, my only direct feedback on whether the price is correct would be either having too many clients, or not having enough of them.” This is how a lot of companies determine prices. You know, supply and demand? I don’t know what to think about the pricing strategy you’ve chosen, which you may know is called “value-based pricing”. If customer Y approaches you for a program exactly like the one you just built for customer X, and you ask Y, “What’s the value of it to you?”, I don’t know about that. It seems not much different from saying to him, “Well, tell me how much money you’ve got. Then I’ll tell you the price.”

 

You say, “I’d be losing money because my pricing sucks.” You lose money when you don’t cover your costs. If you define your costs by how much your customer is willing to pay, then it’s easy to lose money. You also say, “And second, it prevents the client from buying something that isn’t worth it for him” and “guess which one of them gets my limited time”. These benefits can be implemented in other pricing strategies.

 

I think your example is helping me to realize that the market should be used as the determiner of price. Ignoring the question of value-based pricing for now, the assumption of the purchaser, due to all this exposure to competitive pricing over her lifetime, is that the price for any product reflects the product’s value reasonable assumptions about value and competitors’ prices. (Value is relative but we can make good guesses about average values, maybe). It becomes more tempting to the seller to set prices higher when he’s dealing with a customer one-on-one because his competitors aren’t there. (Or, it becomes tempting only to sellers whose values are out of whack.) If the seller takes advantage of this and sets prices high, is it a form of dishonesty because he’s broken the purchaser’s assumption?