Possibility of Price Discrimination
Price discrimination is a strategy performed by companies and brands to sell their products or services to consumers at different prices. The reasons prices vary for each customer are not associated with cost, but are due to many factors. It has been noticed that price discrimination helps a company to reach better growth and increase revenue. Price discrimination is often seen in airline tickets, hotel rooms, car services, property sale and purchase, and other professional services. All these services provide different prices for different customers. In this article, we discuss the possibility of price discrimination.
The most common example of price discrimination can be seen when you buy airline tickets. Most of the airline companies offer different costs for different seats. The price also varies from the location in which you are booking the ticket. This happens because some people are ready to pay more for the same ticket or the same seat. The company also uses the browser’s cookies to learn how eager the person is to buy the ticket. Hence, this alters the price accordingly for an individual. Price discrimination is not a new term and has been used for many years.
Price discrimination has many possibilities which are listed below:
1. Nature of Commodity
This possibility states that the nature of service, commodity, or product should not be resold or transferred from one market to another. If the commodity was bought from a cheaper market and is sold in the dearer market, then the monopolist’s purpose will be defeated.
2. The Distance of Two Markets
Price discrimination is possible if the cheaper and dearer (expensive) market is located far away. In other words, the monopolist can benefit from price discrimination if the market in which monopolist gets cheaper goods to sell in the expensive or dearer market, is located far away.
3. Ignorance of the Consumers
Price discrimination is feasible when customers are not aware of the cheaper market. If they don’t know that they can buy the same items from the cheaper market, the monopolist can easily make profits.
4. Government Regulation
The legal sanction is the dominant player in price discrimination. It’s the law that permits the activity of price discrimination. In some areas, prices are fixed and cannot be altered according to the monopolist’s choice, such as the price of electricity.
5. Geographical Discrimination
Geographical Discrimination is also a factor in price discrimination. Some monopolists distinguish between home and foreign buyers and sell the product at different prices according to nationality. Geographical discrimination is also in practice because the commodity sold in one market cannot be transferred to other markets.
6. Artificial Difference Between Goods
Monopolists often buy cheap products and uniquely pack them to make them look authentic and expensive. They often replace names and labels and sell them in the expensive or dearer markets.
This brings us to the end of our discussion on the possibility of price discrimination. Now do let us know some of your thoughts on the topic.
