Singer-songwriter Carsie Blanton uses an appealing CD sales pitch in her live performances.\u00a0 She says, \u201cI believe music is more important than money. But I like money.\u00a0 So, pay what you wish.\u00a0 That doesn\u2019t really mean free. If you\u2019re broke, sure the CD is free.\u00a0 But if you\u2019re wealthy, its $10,000.\u201d\nThe audience laughs, which reveals an interesting fact about personalized pricing.\u00a0 For most people, it seems intuitively fair.\u00a0 People who have more should pay more.\u00a0 People with less should get a break.\nAs she says in her Pay What You Please Manifesto, the price of her music should be based on \u201cwhat it\u2019s worth to you.\u201d\nOf course, what it\u2019s worth to you depends in part on your musical taste, and people will not all agree on that. But willingness to pay also depends a lot on how much people have to spend.\u00a0 If you have a lot, then you might spend $30 or $40 for a CD you really like.\u00a0 If you have less, a price tag that high will probably mean you won\u2019t buy it even if you like it a lot. But you\u2019d pay $5 for it.\u00a0 Why not charge different prices to different people? If people had to pay what music was worth to them, the rich would tend to pay more and the poor would pay less.\nYet many, especially in progressive circles, think personalize pricing is unfair.\u00a0 And public opinion polls reflect this. \u00a0A survey by Joseph Turow, a researcher at the Annenberg School, found that people \u201coverwhelmingly object to\u2026all forms of price discrimination as ethically wrong.\u201d You might take this result with a grain of salt, however.\u00a0 Carsie Blanton\u2019s sales pitch suggests that how people react to personalize pricing might depend on how you ask the question.\nPersonalized pricing is not discrimination against protected classes\nThis suspicion of personalized pricing partly reflects a deep distrust of how markets work.\u00a0 People suspect that personalized pricing wouldn\u2019t actually reflect what things are worth to their purchasers.\u00a0 They worry that producers might charge on the basis of race or gender or some other arbitrary characteristic in ways that are unconnected to the value people place on things.\nTo be sure, some proxies for willingness to pay more aren\u2019t allowed under the non-discrimination laws. The California Supreme Court recently ruled that Match Group\u2019s attempt to charge older people higher prices for its dating app violated the state\u2019s civil rights law banning age discrimination. The basis for charging higher prices for older people cannot be that they are older people; it must be that they are willing and able to pay more.\u00a0 The same goes for other protected classes, including race, gender, and religion.\nThere will be some tough cases. A new lesbian bar in Brussels charges \u201cdifferent prices for different types of people, depending on their \u201cprivilege.\u201d\u201d\u00a0 \u201cPrivilege\u201d sounds like a social status concept, or maybe a gender concept.\u00a0 The discrimination laws would need to be interpreted to deal with this and other edge cases.\nIn general, personalized pricing algorithms would be subject to the non-discrimination laws and would need to be able to demonstrate that they pass a disparate impact test.\u00a0\nBut at the end of the day companies want to make money.\u00a0 Even Carise does.\u00a0 She\u2019s willing to give her music away free to someone who cannot pay for it, but she wants to charge everyone what the music is worth to them and that means that all, including those in protected classes, will be able to buy her music at prices they can afford.\nGenerally, markets are aligned with the value that people place on things.\u00a0 They punish bigotry. Under personalized pricing, companies will not systematically leave money on the table by mispricing their product on some basis other than what people think it\u2019s worth.\nPersonalized pricing makes the poor better off\nAnother objection to personalized pricing is that it would transfer consumer surplus from consumers to producers, resulting in an unfair re-distribution of wealth.\u00a0\nBut this is just wrong. Personalized pricing is fair. The reason is that consumers are not all the same.\u00a0 Only well-to-do consumers suffer from personalized pricing.\u00a0 They have to pay more, because they can and are willing to do it.\u00a0 Those who are less well-off will pay less and will thereby gain access to a product or service that previously was unaffordable under an average pricing scheme.\nAs Hal Varian and others have demonstrated, personalized pricing is efficient when it increases output. \u00a0It enables people to buy more, not less, at prices they are willing to pay.\u00a0 But its also fair because it makes the poor better off.\nIf the welfare of those who are less well-off goes up at the expense of the rich, how is this unfair?\u00a0 What those who object to personalized pricing on justice grounds seem to be saying is that the rich should use their anonymity in the marketplace to maintain their advantage over those who are not as well off. Put this way, it does not appeal to any reasonable sense of fair play.\nReal personalized pricing is not yet widely practiced.\u00a0 But as more and more information about consumer behavior becomes available companies will increasingly move in that direction. We shouldn\u2019t be afraid of this development. We should welcome it as a way to promote greater equality and overall social welfare.