[qeternity]

I see a lot of answers about how it enables companies to charge more. That’s true, but it also enables companies to charge less. It’s all about price discrimination, and it’s not a bad thing.

Without this you either end up with one of two scenarios. Scenario 1: companies price extremely high on paper and then negotiate down afterwards, as happens in the US health insurance markets, and it’s a nightmare. Or scenario 2 the producer ends up pricing for their profit maximizing volume, which at constant price means customers who realize greater utility are subsidized by those who realize the least utility.

Consider a very real example: AWS charges outrageous markups on bandwidth. This is because many organizations realize far greater value from the AWS ecosystem and are willing to pay. This prices out people who are more price sensitive, and means they end up using a competitor, even if Amazon would happily sell them bandwidth at a lower price. They simply can’t without canibalizing their fatter customers.

I’ve negotiated services for startups at a fraction of the cost of what larger companies are paying (on the order of 90% less) because of this dark pattern.