Term Paper 2 Price Discrimination

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Economics

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Jan 9, 2024

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PRICE DISCRIMINATION De’Ovian Y Taylor American Public University ECON201 I004 Microeconomics for Business Benjamin Davis September 17, 2023

PRICE DISCRIMINATION 2 Price discrimination is the practice of selling the same good or providing a service to different customers at different prices, even though costs to produce the product are identical regardless of who the customer is. Price discrimination is usually broken down by groups based on certain attributes like age, economic status, credit, and gender. Price discrimination allows sellers to charge each customer the maximum price they will pay determining what categories a consumer falls in. “There are three degrees of price discrimination in the first degree, the seller charges the buyer the maximum price the buyer is willing to pay. In second-degree price discrimination, price is determined by the quantity purchased. For example, a discount is offered for bulk purchases. Finally, in third-degree price discrimination the market is divided into segments, and price is based on membership into a particular group”. (Wallmark, M., Greenberg, E., & Engels, D. (2018). I chose this topic because as a young adult I face and realize and try to understand price discrimination when receiving a service or purchasing something. Price discrimination also affects my community and culture heavily. Whether the price for a service or good is more or less, price discrimination does happen. Most people have a negative connotation on price discrimination, but I agree for certain services and goods prices should differ. I feel it is important to understand price discrimination because there are some benefits. Some of the benefits include understanding why you are paying what you are paying for a goods or service. Another benefit is learning how price discrimination works to always try to get lower prices discounts or save money for a goods or service. Just as there are benefits there are some downsides to price discrimination that I feel is important to understand. Price discrimination as mentioned has a negative connotation due to the feeling of unfairness. Price discrimination is also looked at as exploitation. I can understand especially in the medical field insurance field and many more goods and services. Learning about elasticity helped me understand the main purpose for elasticity.

PRICE DISCRIMINATION 3 The article I reviewed is called “Consumer Welfare and Price Discrimination: A Fine Line”. This article was published and has been accepted for inclusion in SMU Data Science Review by an authorized administrator of SMU Scholar. The article has 3 authors, Marie Wallmark, Eyal Greenberg, and Dan Engels. All authors work are scholars at Southern Methodist University. I don’t think the article is biased because it is a collection of ideas written by 3 scholars. They used credible sources as well. In the article “Consumer Welfare and Price Discrimination: A Fine Line” Wallmark, M., Greenberg, E., & Engels, D. discuss how businesses could not determine what maximum price to charge for a goods or service. This article also goes into detail how consumers spending has changed over the years. This article details common pricing strategies businesses use to create a price list. The authors supported their theory with historical data indicating what the customer is willing to pay, combined with certain personal attributes of pricing schemes. The article also demonstrates price discrimination analytically by linking consumer’s spending habits to certain demographic characteristics of a consumer. Additionally, this article addresses the effect of price discrimination on the economic welfare of the consumer. They explain the effect of price discrimination in market competition as well. While reading and reviewing this article, I have a deeper understanding of price discrimination. When I usually think of price discrimination, I had a negative connotation towards it. While reviewing this article I came to an understanding of how price discrimination has an adverse impact on consumers, me included. I overlooked the small things like discounts, lower payment offers I have received and loyalty clubs I am apart of for certain services and goods that I purchase. I learned that price discrimination is vital to continue receiving goods that I like. If price discrimination did not exist markets would not profit and be able to continue to provide services and goods that I enjoy. These services and prices will be considered a luxury and valued at a high price. In conclusion, this article sheds light on the complex challenges businesses face. This article also explains price discrimination is beneficial to the

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