Price Discrimination

Evaluate the view that, because price discrimination enables firms to make more profit, firms, but not consumers, benefit from price discrimination

Colleges and Universities are involved in third-degree price discrimination defined as the difference of prices depending on the factors of gender, sex, geographical location and socioeconomic status.According to Boundless “Analysis of Price Discrimination” “Price discrimination exists within a market when the sales of identical goods or services are sold at different prices by the same provider. The goal of price discrimination is for the seller to make the most profit possible . Although the cost of producing the products is the same, the

The setting of ‘fair’ prices to consumers: the company should bear in mind that customers nowadays will shop around to compare the intended products and services. However for the business survival and growth purposes, the company should also maintain its profit margins to ensure its business growth and expansion. The company needs to consider its cost factors and business operation areas to reduce or minimise the costing areas.

Anyone who shops will encounter price discriminations whether realizing it or not because many department stores and food chains offer discounts to seniors, such as Marshalls and McDonalds. However, the discounts are not automatic; the discounts have to be asked for. Therefore, two people of the same age could purchase the same product, one after the other, and one could receive a discount and the other would not. Price discrimination can be described as identical goods or services being sold at different prices from one single provider (Sexton, 2013). In addition, three categories are provided in order to meet the qualifications of price discrimination, such as operating as a monopoly, providing that the same product or service is not sold by someone else. The organization must operate under the elasticities of demand, and the product or service must have stipulations in order to prevent resale.

Price discrimination is a microeconomic pricing strategy where identical or largely similar goods or services are transacted at different prices by the same provider in different markets. In today’s society we see price discrimination in many places and you don’t even realize that it is price discrimination. Price differentiation is distinguished from product differentiation by the more substantial difference in production cost for the differently priced products involved in the latter strategy. It essentially relies on the variation in the customers' willingness to pay and in the elasticity of their demand. There are three different types of price discrimination. First Degree Price Discrimination involves charging consumers the maximum price that they are willing to pay. Second Degree Price Discrimination involves charging different prices depending upon the quantity consumed and lastly Third Degree Price Discrimination which involves charging different prices to different groups of people (EconomicsHelp, 2015).

“The Robinson-Patman Act prohibits the ability of large, powerful buyers to obtain price discounts by using their buying power and create price discrimination.”

Coupons offered on certain items at a grocery store is definitely an example of price discrimination. The marginal cost to provide the good is the same for the store whether or not the customer redeems a coupon; thus, offering discounts to some of their customers is price discrimination. According to authors Roger LeRoy Miller, Daniel K. Benjamin, and Douglass C. North in, The Economics of Public Issues one of the three conditions that must be met in order for price discrimination to be successful in yielding higher profits is the company must be able to identify differences across consumers willingness to pay for the same product (p. 119). Ultimately the goal is to serve as many people as possible and offering different prices is one way to

In day to day activities, price discrimination can be witnessed at a variety of locations. For instance, McDonalds offers a discount for senior coffee, if it is requested. Price discrimination can be described as identical goods or services being sold at different prices from one single provider (Sexton). In addition, in order for a good or service to qualify for price discrimination, three characteristics are provided. First, a business must operate as a monopoly, providing that the same good or service is not sold by someone else. Secondly, it is necessary for the organization to operate under the elasticities of demand, and thirdly, the organization must have provisions that avoid the possibility of the good or service

11. When market price is P1, a profit-maximizing firm 's total revenue can be represented by the area a. P1 × Q2. b. P2 × Q2. c. P3 × Q2. d. P1 × Q3. 12. When market price is P4, a profit-maximizing firm 's total cost can be represented by the area a. P4 × Q1 b. P4 × Q4 c. P2 × Q4 d. Total costs cannot be determined from the information in the figure. 13. When market price is P1, a profit-maximizing firm 's total profit or loss can be represented by which area? a. P1 × Q3; profit b. (P3 – P1) × Q2 ; loss c. (P2 – P1) × Q1; loss d. We can 't tell because we don 't know fixed costs. 14. When a profit-maximizing firm 's fixed costs are considered sunk in the short run, then the firm a. can set price above marginal cost. b. must set price below average total cost. c. will never show losses. d. can safely ignore fixed costs when deciding how much output to produce. 15. A profit-maximizing firm in a competitive market is currently producing 200 units of output. It has average revenue of $9 and average total cost of $7. It follows that the firm 's a. average total cost curve intersects the marginal cost curve at an output level of less than 200 units. b. average variable cost curve intersects the marginal cost curve at an output level of less than 200 units. c. profit is $400. d. All of the above are correct. 16. For a certain firm, the 100th unit of output that the firm produces has a marginal revenue of $10 and a marginal cost of $7. It

Price discrimination is part of the commercial and business world. Movie theaters, magazines, computer software companies, and thousands of other businesses have discounted prices for students, children, or the elderly. One important note though, is that price discrimination is only present when the exact same product is sold to different people for different prices. First class vs. coach

"The monopolist is engaged in price discrimination, the practice of selling a specific product at more than one price when the price differences are not justified by cost differences" (McConnell and Brue Chapter 24). Under these conditions, the monopolist can increase its profits by charging different prices to different buyers. Trinity must adhere to certain conditions in order to conduct the price. These conditions include monopoly power, market segregation, and no resale. A prime example of price discrimination occurs at the

* First-degree price discrimination – different prices are charged based on what the buyer is willing to pay

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 “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 marginal costs remain same for consumers but the prices vary. Or the opposite when prices are the same for consumers but marginal costs differ. For example at movie theaters there is a price difference for senior citizens and non senior citizens. The

Price discrimination can be defined as when the same good or service is sold at different prices to different consumers. If we look at this definition of price discrimination, for an example, we can show that price discrimination can be seen in the entrance tickets of parks such as Universal studios; this is due to the fact that there are discounts for children and senior citizens. (Phlips L. , 1983) However, this can be seen as not being discriminative at all due to the fact that if the price difference full reflects the difference in the cost of carrying the good from the seller’s location to the buyers’ location.

Firms, in general, tend to produce the quantity which ensures that marginal cost equals marginal revenue in order to maximise profit. This way of deciding the best output applies to both monopolies and competitive firms, though outcomes differ. The total output defines the equilibrium price for the level of consumer demand. The demand curve then indicates price and revenue. Finally, the average cost is worked out to identify the cost and profit for the profit maximising output and consequent price.