Get Smart

A fiscal cyclone touched down at strip malls and suburban gallerias this weekend as rabid shoppers welcomed yet another holiday season predicted to generate billions of dollars in traditional and electronic retail sales. The 1999 holiday buying frenzy, which escalates Friday night with Hanukkah, will only begin to wane after Christmas, Kwanzaa, and New Year's Eve. Until then, money -- the spiritual insignificance of, the relative shortage of, the comparative buying power of -- will dominate the discussions and preoccupations of local newscasters, scrimping Santas, and giddy merchants everywhere.

With that economic inevitability in mind, Fast Company sought financial advice from a man who passes the buck -- or at least lessons, theories, and tactics related to the buck -- for a living. He's taught financial strategies to business school students at Harvard and Northwestern. He's penned more than 100 articles and eight books, including the 1999 release, "Smart Money Decisions: Why You Do What You Do With Your Money (and How to Change for the Better)" (John Wiley & Sons, Inc.). But, more importantly, he pinches his pennies -- hard.

Max Bazerman hates to waste money. And he hates to see smart people act stupidly with their pocketbooks. In the following Web feature, Bazerman -- Gerber Distinguished Professor of Dispute Resolution in Organizations at the Kellogg School at Northwestern and Marvin Bauer Fellow at the Harvard Business School -- offers a few tips, strategies, and warnings for online shoppers using services such as priceline.com, eBay, and E*TRADE. First, study Bazerman's list of Top Ten Money Mistakes taken from "Smart Money Decisions," and then learn his guidelines for smart Web shopping below.

Beleaguered Bidders

Why do airlines play the priceline.com game? It's one more extreme version of the Saturday night stay rule. Airlines have long discriminated their airfares based on whether you stay a Saturday night. That policy allows them to sell seats to leisure travelers who won't pay very much while at the same time charging business travelers -- who aren't spending their own money anyhow -- shockingly large amounts of money for basically the same trip.

Priceline.com is taking this market niche separation one more step by saying, "We want to get people traveling who are amazingly price-conscious. These are probably people who wouldn't go on the trip if priceline didn't exist. And they're willing to run the risk of significant inconvenience to get there." Now, instead of sitting next to a person who paid $300 by staying over Saturday night, they're going to be sitting next to someone who paid $128 because they bid on priceline.com. The airlines are finding one more way to price discriminate based on the flexibility of the traveler.

As a customer, you should assume that you're going to get the worst of the possibilities that priceline specifies in the rules. If you're still potentially willing to go on the trip, call up United Airlines and find out how much they would charge you normally. Then ask yourself, "How much would United have to pay me to follow these unusual requirements of stopping in Chicago on my way from Boston to Florida?" Discount the price appropriately and go ahead and bid. For some people, that's going to mean that priceline.com would have to pay you to fly and, obviously, they're not going to get a seat. But for other folks, it's quite worthwhile and they might even think of it as fun.

In addition, if you ask yourself how much your time is worth, you're less likely to get sucked in to checking various Web sites or pricing schemes on an obsessive-compulsive basis. Ask yourself how much money an airline would have to pay you to do white collar work for an extra two hours. Also, some flyers are quite happy in an airplane doing light reading out of their briefcase, while others are nervous and find flying an upsetting experience. That comfort level logically affects how much you're willing to pay to have a ticket that may require multiple take-offs and landings.

Auction Block Outs

Potentially, online auctions are a good way to get bargains if you're well informed. However, the potential to be suckered is even higher than in live auctions because you can bid on items that you don't even get to inspect. If you go to a rug auction, you at least need to know how to evaluate whether this is a Persian rug, as they auctioneers are claiming. When you buy on eBay, however, there is more complexity involved in judging a rug without even being able to see it. And what are the rules? Do I send money first? What are my means of recourse? It takes a significant amount of time to keep track of all those things.