The Pros And Cons Of Price Discrimination

INTRODUCTION:

Price discrimination means charging a different pricing of same product, good and services by the same provider in different markets. It is a pricing strategy by which a producer charges its good and services at different pricing levels. Firms are selling their same goods at a market price in competitive market. So for price discrimination firm must have some market power.

The first lesson is that price discrimination is a ration strategy for maximizing profit that is a monopolist can increase their profit by charging different pricing for different customers a monopolist can charge s a price to each customer according to their willingness to pay. Second lesson is that price discrimination has an ability to separate their customers

When price discrimination is efficient then output can be expanded even output remains constant price discrimination can reduce efficiency by misallocating outputs among customers. keeping the difference pricing groups are separate, making price difficult, or restricting price information, boundary set up by the marketers to keep segment separate. so Price discrimination is very common in services where resale is not possible in services an example is student discounts at museums and restaurants. In this theory students for their condition as students will may get lower price than other groups of customers for a product or service and later will not become resellers since what they get received, may only be used and consumed by them. intellectual properties which are enforced by law and technology is another example of price discrimination.

Price discrimination also be seen in the requirements that goods or services can be identical is relaxed. For example, so-called premium products which have a price differential that is not explained by the cost of production. economists have argued this is a form of price discrimination exercised by providing a means for consumers to reveal their willingness to

It is the situation when supplier sell the same product at different prices depends on the quantity purchased, not only it is inefficient but also anti competitive because the smaller companies may not receive the same prices as the bigger companies. It is also called quantity discount, it reduces consumer surplus and more common than 1st degree.

3RD DEGREE PRICE DISCRIMINATION:

Third type of price discrimination is a commonest type means charging a price to different groups of consumers. The goods or services must not be transferable in this, the market is inefficient because of the dead weight loss in other words separation of market reduces dead weight loss and the separation of market enables the firm to increases profits.

For examples: there are two segments of market students and alumni. These two groups have different elasticities of demand if the price increases the students are less likely to purchase a product then alumni so the firm charges different prices to each group or the company maximize their profits on each groups

The first, second and third degree of price discrimination of taxonomy is due to modern