click here to jump to start of article
Join Our Newsletter

Get latest articles and videos with Jewish inspiration and insights​




The Jewish Ethicist  - Discounts

The Jewish Ethicist - Discounts

A Jewish view on fair pricing.

by

Q. I have a standard price list, but I'm pretty liberal about giving discounts when I need to make a sale. Is this a problem?

A. Adam Smith noted that economic progress is dependent "a certain propensity in human nature," namely "the propensity to truck, barter, and exchange one thing for another". After all, Smith notes; "Nobody ever saw a dog make a fair and deliberate exchange of one bone for another with another dog."

However, people nowadays seem to prefer facing predictable prices over having to haggle over every exchange, and so most sellers today have standard prices which apply equally to all customers.

The Jewish approach to "fair" pricing is very lenient. There is no fair price doctrine in Jewish law, and except for a few regulated staples a seller is allowed to charge any price he likes for his wares. At the same time, the Jewish approach to transparent pricing is very strict. The demand for a transparent pricing policy stems from two distinct though related prohibitions: the prohibition on overcharging, known as onaah, and the prohibition on misleading practices, known as geneivat da'at.

The prohibition on overcharging, or underpaying, is learned from the following verse: "When you sell to your fellow or buy from the hand of your fellow, don't oppress each man his brother" (Leviticus 25:14). From the context of the verse we see that the "oppression" refers to overcharging, and the rabbis inferred that it applies equally to underpaying. However, this prohibition is breached only when the price deviates significantly from the customary market price without the customer's knowledge. If the seller says, "Other stores sell this object for ten dollars, but I won't sell it for less than 20", there is no onaah. (Likewise if a customer tells the seller, other stores are selling this item for ten dollars but I'm only willing to give you five.) Since the prohibition is contingent on the buyer's reasonable expectations, and can be waived, we see that the main emphasis is on transparency.

A separate transgression is known as geneivat da'at. This is breached when the buyer is misled regarding the price of an object, even if the price itself is fair or even a bargain. A classic case of geneivat da'at in a commercial context would be advertising a product as on sale when it is selling at its usual price, or even advertising "50% off" when there is a genuine discount but it is more modest.

In your case, there is no problem if you generally charge a particular price but once in a while you show flexibility for someone who is needy or particularly stubborn, etc. The average customer is justified in believing that he is paying the going price. Assuming the law allows it, you can also decide to give discounts to a particular class of customers: local residents, college students, soldiers, etc. If you publicize these discounts, then anyone who frequents your place of business knows the score.

The problem is if the exception becomes the rule and you make so many "discounts" that the list price is only for suckers. I was once in a clothing store with a prominent sign saying that all prices are non-negotiable. The sign should have made me suspicious, because normal stores where the prices really are non-negotiable don't have signs like that. Anyway, it turns out that even without any negotiation on my part the salesman offered me "discounts" on everything I bought – discounts that still left the prices a bit above what was accepted in other stores. Anyone who paid the label price would have been ripped off not only relative to other stores, but even in relation to what other customers were paying in the same store.

Besides the ethical concern there is also a practical one. When you are too flexible with your pricing you open yourself up to constant demands for discount which can wreck your markup.

So it is okay for you to offer an occasional discount to make a sale, but you should try to make sure that they remain truly occasional.

Send your queries about ethics in the workplace to jewishethicist@aish.com

The Jewish Ethicist presents some general principles of Jewish law. For specific questions and direct application, please consult a qualified Rabbi.

Published: August 10, 2008


Give Tzedakah! Help Aish.com create inspiring
articles, videos and blogs featuring timeless Jewish wisdom.

Visitor Comments: 6

(6) Mark Douglas Obenour, August 16, 2008 3:05 PM

Unscroupulous Retailer What do you do?

I heard of an unscrupulous retailer who goes behind the back of the employees and docks their wages, a smidgen every so often to make his labor cost come out right. (Fast food vendor) Some of the employess caught on to the practice and how he was covering it up by using Thermal Paper. You put the Thermal paper in your pocket and it fades or if it gets hot the whole thing turns black. So the employees wound up taking their time slips and photocopying them. (The photocopies would not fade or become black) and wound up proving the employer was doctoring the records. More than one employee has let me know of this devious practice in the community at this retailer. Usually they wind up quiting one at a time and this practice persists in their chain of restaurants. Is there anything that can be done besides not going to an unethical business?

(5) Ronni, August 12, 2008 12:16 PM

wrong price

There is a certain shoe store owned by religious people that my husband refuses to shop at because he says everyone there gets a different price and because we take care to present an image of doing well despite the opposite reality (our financial situation is our business) we are always charged the most in comparison to the other customers. How can a storeowner give or not give a "poverty" discount when they have no way of knowing the real situation? As far as being undercharged, the Gemara I beleive discusses this very issue and any money you save is a major loss compared to the huge "kiddush Hashem (giving honor to G-d's name and His people)you could have made by not taking the opportunity to show that Jews are ethical people who are not looking to cheat or for a free ride especially when it's not the owner but an employee saying forget the charge.

(4) DB, August 12, 2008 9:53 AM

Kashruth "discounting"

Our rabbi told us something I found very moving. In our place and time, most every Yid has assets enabling him/her to acquire two pots . . . two sinks . . . maybe even two ovens. But in other times and places, and in other neighborhoods, the separation of meat and dairy is accomplished in accordance with what the householder can afford. There is no requirement to have two ovens or two sinks or even two pots if this is beyond your means. [This brings to mind the other extreme: the pro basketball player I read about who has 12 televisions in his kitchen because he "likes symmetry".]

(3) Bob Rabinoff, August 12, 2008 9:30 AM

Build Value

My old sales manager always told me instead of reducing price -- build value. Admittedly, in our case we as individual salespeople couldn't alter the price, and the company's prices were, well, pricey. But it was a good exercise to convince our clients that they were getting good and valuable exchange for the extra money they were paying. While this depends on the business of course, it's always a good principle. It's not easy keeping 613 mitzvot -- but H" didn't cut it down to make it easier -- He built value! "Keep these laws so you and your children will live long on the good Land which I am giving you." etc.

(2) Jerry Solomon, August 12, 2008 7:38 AM

Discounts= Bologna=Treif

Every week dept. stores advertise 50% off on the same luggage..sometimes a bonus discount is added??Where is our FTC??Where are ethics??I see reason to distrust retail stores, which is well-earned.

See All Comments

Submit Your Comment:

  • Display my name?

  • Your email address is kept private. Our editor needs it in case we have a question about your comment.


  • * required field 2000
Submit Comment
stub
Sign up today!