Price Discrimination Essay

4326 words - 18 pages

There are a lot of different pricing strategies defined and described. Different companies implement different pricing strategies. But the goal is the same for everyone – to gain maximum profits and to keep one’s business successful. This is there price discrimination could help to solve the problem. Different prices for different segments, in different countries or in different amounts – there are few ways how to implement price discrimination for products and services. The main purpose of this work is to analyze those ways more deeply while looking for various examples concerning price discrimination.
The tasks are as follow:
To provide the definition of price ...view middle of the document...

Differentiation of the product gives the supplier greater control over price and the potential to charge consumers an excelent price because of noticed differences in the quality of a good or service. However, not all price differences as illegal.
Conditions necessary for price discrimination identified by authors Geoff Riley and Eton College:
Differences in price elasticity of demand between markets - a different price elasticity of demand from each group of consumers is needed.
Barriers to prevent consumers switching from one supplier to another – the firm must be able to prevent a process where consumers who have purchased a good or service at a lower price are able to re-sell it to those consumers who would have normally paid the expensive price.
Degree price discrimination
Price discrimination, is separated into degrees. Different authors call the degrees of price discrimination differently, but the main features in the whole three degrees are the same. First, second and third degree price discrimination exist and apply to different pricing methods used by companies. The comaprison of three authors can be seen in the table below.

|Price discrimination degree |Philip Kotler |Geoff Riley, Eton College |Tricia Ellis-Christensen |
|First-degree price discrimination |A separate price to each customer |Separates the whole market into |Identical goods are sold at |
|(Perfect price discrimination/ |depending on the intensity of |each individual consumer and |different prices to each individual|
|Optimal pricing) |demand |charges them the price they are |consumer. |
| | |willing and are able to pay. | |
|Second-degree price discrimination |The seller charges less to buyers |Selling off packages of a product |Charging lower prices for higher |
| |who buy a larger volume |concidered to be extra capacity at |quantities. This degree also |
| | |lower prices than the previously |includes early - bird discounts |
| | |published/advertised price | |
|Third-degree price discrimination |The seller charges different |Charging different prices for the |Concludes the most sales from each |
| |amounts to different classes of |same product in different segments |segmented “group” of consumers. |
| |buyers. |of the market. |(students, seniors) |
| | ...

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