Price Discrimination - 1560 Words

PRICE 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 perfect price discrimination is illegal, when the optimal price is set for every customer, imperfect price discrimination exists. For example, bus companies usually charge four different prices for a ride. The prices target various age groups, including†¦show more content†¦For instance, the firm charge a higher price to group with a more price inelastic demand and a relatively lower price to the group with a more elastic demand. Therefore, for groups like adults, the prices are higher whereas for students, the prices are lower. Advantages of Price Discrimination; †¢ Firms generate more revenue; It allows some firms to stay in the business that otherwise would not be in the market at all. For instance, price discrimination is important for airline companies that offer different prices depending on the peak or off-peak period. (E.g. Easy jet and Ryan air) †¢ Consumers will take the advantage of lower fares; For example, old people, those are more likely to be poor, benefit from lower ticket prices, if they would like to go the cinema or theatre. †¢ Price discrimination can lead to more intense competition which benefits consumers; When firms have difficulty committing to prices, they often are forced to charge low prices. †¢ Increased revenues can be used for research and development purpose and customers would benefit from it in long term. Disadvantage of Price Discrimination; †¢ Some consumers will end up paying higher prices; These higher prices are likely to be allocatively inefficient because price is more than Marginal cost (PMC). †¢ Those that pay higher prices may not be the poorest; For instance, adults could be unemployed or old age pensioner may beShow MoreRelatedWhat Is Price Discrimination?1337 Words   |  6 PagesWhat 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 marginalRead MorePricing Strategies For Price Discrimination786 Words   |  4 Pages When the same goods are sold at more than one price to a customer, a sophisticated pricing strategy occurred which is in a way called a price discrimination and not because of the cost differences, but the MR = MC rule for setting the price to achieve maximum profit. There are many pricing strategies adapted to yield firms profits above to those earned by simply charging a single price where marginal revenue equals marginal cost (Brue, Mcconnell, and Flynn, 2014, p. 417 - 438). There are few pricingRead MoreThe Price Of Price Discrimination851 Words   |  4 Pagesprice discrimination is selling the same product to different consumers at different prices, for reasons other than cost. For every goods and services, some consumers are willing to pay more than others, therefore firms that use price discrimination strategy charge different prices in different markets where there are different PED’s. If the product is slightly different it may be product, not price discrimination. The aim of price discrimination is to convert consumer surplus into producer surplusRead MorePrice Discrimination711 Words   |  3 PagesPricing Discrimination by Amazon.com The Internet allows shoppers to easily compare prices across thousands of stores. But it also enables businesses to collect detailed information about a customers purchasing history, preferences, and financial resources and to set prices accordingly. So when you buy an airplane ticket or a DVD online, you may pay a higher or lower price than another customer buying the very same item from the very same site. In September 2000, Amazon.com reportedly outragedRead 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 sensitive, or the demand is elastic, when using price discriminationRead MoreBasic Types Of Price Discrimination Essay1757 Words   |  8 PagesPrice discrimination is defined as charging different customers different prices 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 sensitive, or the demand is elastic, price discriminationRead 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 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 otherRead 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 MoreThe Use of Price Discrimination in Ticket Sales for Special Events3332 Words   |  14 PagesUse of Price Discrimination in Ticket Sales for Special Events† Master of Business Administration Program â€Å"International Finance and Banking† Full time study 1MS group students Aleksandrs Rogovs Margarita Ozola Alina Aleksandrova Anna Korcagina Anita Nenna Nebo Riga 2012 Table of contents Table of contents 2 Introduction 3 1. Positive and negative consequences for buyers and sellers of the special event tickets in case the fixed price approach