Price Discrimination : The Only Type Of Good Discrimination

The recent Time Magazine article "Post-Sandy Price Gouging: Economically Sound, Ethically Dubious," evaluates the recent price gouging by businesses during Hurricane Sandy (Futrelle). Examples of price gouging include raising prices on batteries and gas to astronomic levels, with the knowledge that the captive public audience will purchase the products regardless of the price. Businesses that have raised prices include bodegas, supermarkets and gas stations. Although such price gouging is undeniably an economically profitable business measure, the article argues that it is ethically dubious since it takes advantage of the public.

Amazon can use 3rd degree price discrimination to divide customers into different groups and charge a different price to customers in different customers in different groups, but the same price to all consumers within the group. The firm will charge groups of customers prices relative to their demand elasticities. We can illustrate this on a graph:

When consumers decide to purchase a product or service a car, a new refrigerator, or prescription drugs, the goal of the antitrust laws is to make sure their choices are not restricted unreasonably. Consumer choice is a powerful incentive for the sellers of any products to keep their prices low and their quality high. When the antitrust laws are vigorously enforced, businesses must respond to what consumers want. A business that ignores consumer wishes, by refusing either to keep prices competitive or to offer

For example, If you are selling a product that is a normal good with a high rate of competition in the market, raising the price could have negative effects on overall profits because users will simply find another substitute somewhere. Charles stated that market separation may come into play when firms realize there are differing elasticity curves for different consumers of the same product. Firms can maximize profits by evaluating consumer segments within a single market. If the firm notices different demand elasticity for different segments it may opt to engage in price discrimination to maximize profits. Charles gave Microsoft Office as an example; the same software is offered to students, casual users and business users at different price

Businesses are not only faced with competition within the industry they operate in. They also face competition from businesses in other industries.

* The more differentiated the product is, the less effective price leadership is as a means of collusion.

According to Melvin and Katz (2015), Lian’s denial of promotion falls under the mixed motive theory of discrimination. Mixed motive theory applies when motives are both legitimate and discriminatory, thus providing protection under Title VII. Therefore, Lian must prove that his protected-class membership was a substantial factor in the outcome of the promotion denial. Once Lian establishes proof of discrimination, the burden to prove the decision was made for legitimate reasons shifts to the employer.

Price discrimination is where a firm changes different consumers different prices for the same service.

The price ceiling is the maximum price a seller is allowed to charge for a product or service. An impact on society includes when the prices are so high of a product, that no one can buy it. A price floor is the lowest legal price a product or service can be sold at. When market price is at its lowest, it may still be too high for consumers to purchase products. Governments can intervene for any purpose, and they are the ones who set these price controls.

The two types of price discrimination I have chosen are lower movie ticket price during the afternoon on weekdays which happen because people tend to be at school or at work early in the day which makes it easier to go at night. The other price discrimination is cyber Monday sales which is the lowering of prices to keep up with other big stores near black Friday time which is because people tend to buy a lot of products during this time of the year so them lowering the prices to encourages the consumer to buy more product then they would of originally. Sense Newegg is one company out of many other tech companies it does not hold monopoly power so it cannot be the one who is the price maker in its market.

Predatory pricing is a tool that is used to achieve market power. It is the practice of pricing below cost. This can foster market power in three simple ways, by eliminating rivals, by disciplining rivals who refuse to cooperate in keeping prices at monopoly levels, or by depressing the market value of rivals' assets so that a predator can purchase these assets at below market prices. Predatory pricing does not allow the market to work freely. It is a way of controlling the market.

Justice. Consumers compare themselves to peers and believe them to be entitled to certain benefits or outcomes. The discrepancy in price among their comparison group will result in feelings of inequity. For most types of products, consumers will reduce the inequity by complaining or by switching to another competitor. For prescription drugs, it might not be possible for the consumer to switch to another competitor, thus the only option available to them was to

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.

Since the Medi Cult is the “First Company” in this business, they expect they have two or three years advantages by being the first to market. Therefore, the Medi Cult could implement the Monopolistic Power” in the market. The Price discrimination could be applied to this case is the “Third Degree Discrimination”.

This chapter sets out the rationale for price discrimination and discusses the two major forms of price discrimination. It then considers the welfare effects and antitrust implications of price discrimination.