Price Discrimination Case Study

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Recommended: Disadvantages of price discrimination

Price discrimination is part of the legal business strategy. It is occurring when companies charge different prices of the same goods and services to each customer or each type of customers to maximise profit based on the consumer 's price sensitivity and willingness to pay. It is not based on the cost of production, and it exists because different users place different values or prices on the same products. Therefore, companies can classify their customers based on the common traits and group them together to charge different prices. Firms are maximizing the producer surplus and changing the consumer surplus into supernormal profit. Consumer surplus is the difference between the maximum prices that the buyers willing to pay and the price they actually pay. Producer surplus is the difference between the minimum …show more content…

Products in amazon China are cheaper than amazon UK. Today, Firms Gather consumer 's information and buying habit then charge separately is considered as standard practices. Large online retailers can use cookies on their sites and get a lot of information about their customers like browsing history and location. Cookies are a type of message that the Web server give to a web browser that then stores the information for later use. For example, companies informed their previous customers about current discounts and offers through emails. The main purpose of cookies is to gather user 's information like user locations and present different version of the web pages according to the information received. However, companies need to implement privacy policy and do not share or sell customers information with others. For example, amazon.com will customise their advertisement based on browsing history of their website’s visitors. Each customer receives a different version of the website with different products recommendation and

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