The purpose of price discrimination is to capture the market’s consumer surplus . Price discrimination allows the seller to generate the most revenue possible for a good or service.
Why would a company use price discrimination?
Companies benefit from price discrimination because it can entice consumers to purchase larger quantities of their products or it can motivate otherwise uninterested consumer groups to purchase products or services.
What are the advantages of price discrimination?
Price Discrimination involves charging a different price to different groups of consumers for the same good. Price discrimination can provide benefits to consumers , such as potentially lower prices, rewards for choosing less popular services and helps the firm stay profitable and in business.
What is price discrimination in simple words?
Price discrimination refers to a pricing strategy that charges consumers different prices for identical goods or services .
What are examples of price discrimination?
Examples of price discrimination include issuing coupons, applying specific discounts (e.g., age discounts) , and creating loyalty programs. One example of price discrimination can be seen in the airline industry.
What are the conditions of price discrimination?
Price discrimination is possible under the following conditions: The seller must have some control over the supply of his product . Such monopoly power is necessary to discriminate the price. The seller should be able to divide the market into at least two sub-markets (or more).
What companies use price discrimination?
Industries that commonly use price discrimination include the travel industry, pharmaceuticals, leisure and telecom industries . Examples of forms of price discrimination include coupons, age discounts, occupational discounts, retail incentives and gender based pricing.
How is price discrimination profitable?
Price discrimination is profitable only if elasticity of demand in one market is different from elasticity of demand in the other . Therefore, the monopolist will discriminate prices between two markets only when he finds that the price elasticity of demand of his product is different in the different sub-markets.
Which of the following is NOT type of price discrimination?
The correct answer is D. Charging the same price to everyone for a good or service is not price discrimination.
Which is the best example of price discrimination?
An example of price discrimination would be the cost of movie tickets . Prices at one theater are different for children, adults, and seniors. The prices of each ticket can also vary based on the day and chosen show time. Ticket prices also vary depending on the portion of the country as well.
What is price discrimination with diagram?
In this case, a firm can discriminate according to the quantity consumed . This is called second-degree price discrimination, and it operates by charging different prices for different quantities or ‘blocks’ of the same good. Different prices are charged for different quantities, or “blocks” of the same good. In Fig.
Who can discriminate?
- Age Discrimination.
- Disability Discrimination.
- Sexual Orientation.
- Status as a Parent.
- Religious Discrimination.
- National Origin.
- Pregnancy.
- Sexual Harassment.
Why is price discrimination unfair?
Many people consider price discrimination unfair, but economists argue that in many cases price discrimination is more likely to lead to greater welfare than is the uniform pricing alternative—sometimes for every party in the transaction. ... It concludes that price discrimination is not inherently unfair .
Is it legal to charge different prices to customers?
Charging different prices to different customers is generally legal . ... The federal Robinson-Patman Act requires sellers to treat all competing customers on the same basis, unless there is some recognized legal justification for different treatment.
Is price discrimination illegal?
Stated as a rule, price discrimination becomes unlawful under federal antitrust law only when it threatens to undermine competitive processes in an affected market and otherwise meets the specific criteria of the federal price discrimination statutes (viz., the simultaneous, ongoing sale of the same or similar products ...
Does Apple use price discrimination?
According to Wharton marketing professor Jagmohan Raju, Apple’s price cut is an example of a strategy known as “ temporal price discrimination .” Companies using this strategy charge people different prices depending on the buyer’s desire or ability to pay. As a result, companies win two ways.
