What Is Price Discrimination - 1337 Words

What is price discrimination? For first time readers one would think price discrimination is race, sex, and class issue but incredibility it has nothing to do with that. This chapter discusses the concept of price discrimination. What is price discrimination? It â€Å"is defined as the existence of price difference across customers for the same good that are not due to differences in the marginal costs of supplying the customers.†( North and Miller, 1971, p.122). Price discrimination arises when marginal costs remain same for consumers but the prices vary. Or the opposite when prices are the same for consumers but marginal costs differ. For example at movie theaters there is a price difference for senior citizens and non senior citizens. The†¦show more content†¦So let’s say there is a company selling goods to two different types of groups. The working class and the retirees. The retirees have a lower income than the working people. They will be considered to have a price elasticity of dema nd for the goods. In other words they are eligible to be charged differently than to the working class. Companies can lower prices for retires and raise the prices for the working people at the same time gaining higher profit. Companies have to be concern that the customers who are buying goods are in fact retirees and working people. That the customers are not allowed to resale their goods. Pharmaceuticals companies by law are prohibited to resale prescription medications. Movie theaters prevents resale for lower prices by making sure that the customer must attend personally. Companies such as Netflix do not offer discounts for senior citizens because it will be easier for person to get a discounted price without meeting the eligibility. Price Discrimination in Airlines Airlines are well known for price discrimination. Before 1978 airline fares in the US were regulated by the federal government. All airlines were charged the same priced. After 1978 this regulation deflated. Airlines discovered that there was differences in price elasticity of demand for customers. For example business travelers had a lower price elasticity and willing to pay a higher price than others. They areShow MoreRelatedWhat is Price Discrimination? Essay1359 Words   |  6 PagesPrice Discrimination Price discrimination is charging consumers with different prices for identical similar products, which are not related to costs of production. An important point to mention, Products that varies in prices due to cost variation and justification are not considered as price discrimination. For example, charging different prices for the same product for different geographical locations does not result into price discrimination, because of the transportation or delivering cost differentialRead MoreBasic Types Of Price Discrimination1740 Words   |  7 PagesPrice discrimination is defined as charging customers a different price for the same product. One major factor of price discrimination is elasticity of demand. Elasticity of demand measures the percentage of change in quantity to percentage of change in price. If the percent of change is greater than one, it is elastic. On the other hand, if the percentage of change is less than one, it is inelastic. For customers who are not price s ensitive, or the demand is elastic, when using price discriminationRead MorePrice Discrimination1560 Words   |  7 PagesPRICE DISCRIMINATION What is Price Discrimination; Price discrimination is a pricing tactic that charges consumers different prices for the same product or service. In other worlds, price discrimination exists, when identical product or service transacted at different prices from the same supplier. Price discrimination allows a company to earn higher profits than standard pricing because it allows firms to capture every last pence of revenue available from each of its customers. While perfectRead MorePrice Discrimination : The Only Type Of Good Discrimination914 Words   |  4 PagesPrice Discrimination - The Only Type of Good Discrimination Price discrimination is common term used throughout the economics realm. In a perfect economic world, one price would fit all, however, we are not nor will we ever be in a perfect economical balance. Price discrimination takes on many different titles but can be defined by one simple statement of selling the same product to separate individuals for a different price (Elegido 633). Many consumers may identify this as being an unlawful actRead MorePricing Strategies For Companies With Market Power828 Words   |  4 Pageslevel of market power. So what is market power? Market Power is the â€Å"Extent to which a firm can influence the price of an item by exercising control over its demand, supply, or both,† (â€Å"What is market power† 2015, n.d., p.1). These firms are examples of firms that have been able to strongly influence how they price their products through various pricing strategies. What is a pricing strategy? A pricing strategies are â€Å"activities aimed a t finding a product’s optimum price, typically including overallRead Moreprice discrimination versus price differentiation1359 Words   |  6 PagesPrice Differentiation vs. Price Discrimination Price differentiation and price discrimination: two terms used in Marketing and Economy. First of all, it is appropriate to make an accurate definition for both of the terms. Price differentiation is a pricing strategy that â€Å"charges different segments of customers altered prices for the same products or services.† Likewise, we can meet with the same definition if we look for price discrimination definition. Then, is there a difference between priceRead MoreThe Price Discrimination Of Amazon1303 Words   |  6 Pagesretailer, like Amazon, can price discriminate to maximise its profits. This pricing policy is used because ‘some customers will value your product or service while others will value it less’ (Smith, 2004). Price discrimination is where a firm sells the same product at different prices to different consumers. My job, as a high powered consultant, is to analyse and discuss the possible benefits and costs of using price discrimination in Amazon. II. Degrees of price discrimination Amazon can apply one threeRead MoreShould Firms Price Discriminate? Why Or Why Not?1265 Words   |  6 Pagesfirms price discriminate? Why or why not? You are a high powered consultant and have been asked by a large online retailer to help them decide whether or not they should use price discrimination on their website. You have been hired to analyze and present the economic case for and against firms using price discrimination and to provide a recommendation to the retailer as to what they should do. Your report must be no longer than 1000 words. The report must clearly define price discrimination and outlineRead MoreShould Companies Price Discriminate? Why Or Why Not?1117 Words   |  5 PagesTopic: Should firms’ price discriminate? Why or why not? ECONS10081 9485293 18th of November 2014 Price discrimination is charging different people for different price for the same products or services. The benefits are higher income by extracting the consumer surplus and transforming it to supernormal profit and increase the market power. The disadvantage is purchasers have their doubts when their information are being captured and it is crucial for retailers to try to maintain trust. OtherwiseRead MoreEssay on Price Discrimination1602 Words   |  7 PagesPrice Discrimination Prices are based upon the price elasticity of demand in each given market. In other terms, this means that during ladies night at the local bar, it costs more for men to have a beer than women simply because these bars find it o.k. to charge females less, as a way to draw more females to the business on a specific night. Price discrimination is part of the commercial and business world. Movie theaters, magazines, computer software companies, and thousands of other