Small-number scams redux

I gave some examples of how crooks can use "small numbers" to hatch up scams in several contexts here. The essence is to steal a little from a lot of people. Each person has little incentive to report or deal with the theft.

Another example is supermarkets. I have often speculated whether supermarkets can generate extra revenues by conveniently overcharging a random proportion of their bills by a few cents each; few customers would notice or even if they notice, it would not be worth their while to go back to the stores to argue over a few cents. Over thousands or millions of bills, that is a lot of revenues. The telling signs would be that the billing errors are skewed positive (over-charges).

Now, there is evidence that such fraud is widespread. The New York Post reported work done by the New York City Department of Consumer Affairs. They estimated that one in three bills contains at least one over-charged item.

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I wish I thought of this in college. This sounds like a wonderful class project to learn about data collection, sampling and hypothesis testing that has real-world impact (although you'd have to apply for some funding to buy groceries!)

 

Comments

[Erin Jonaitis]

Interesting!
Can we really infer fraudulent intent here, though? I would expect errors in the customer's favor to be corrected more quickly than errors in the store's favor, even if everyone involved is honest, because nobody will get penalized or fired for making an error in the store's favor -- which probably makes them less attentive.

I also notice the New York Post article didn't say anything about the frequency of undercharging!