Should Companies ' Price Discriminate? Why Or Why Not?

A large online retailer, like Amazon, can price discriminate to maximise its profits. This pricing policy is used because ‘some customers will value your product or service while others will value it less’ (Smith, 2004). Price discrimination is where a firm sells the same product at different prices to different consumers. My job, as a high powered consultant, is to analyse and discuss the possible benefits and costs of using price discrimination in Amazon.

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

However, I don’t agree with the fact that the government place rules on a merchant product. In the article, Zwolinski brought up the point on what is a “reasonable” price, and how does that vary. The government can use the word “reasonable” to their own benefit. Zwolinski also share that price gouging is very unfair on businesses. Price gouging can perhaps cause a business to not make a large profit. However, is a large profit for a business more reasonable than someone losing their life due to price gouging? Does a large profit for a business account for how many store owners can take advantage of many in low income minimum wage workers and

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

there are a number of different buyers and sellers in the marketplace. This means that we have competition in the market, which allows price to change in response to changes in supply and demand. Furthermore, for almost every product there are substitutes, so if one product becomes too expensive, a buyer can choose a cheaper substitute instead. In a market with many buyers and sellers, both the consumer and the supplier have equal ability to influence price.

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.

The first term we will use is price discrimination. Price discrimination is selling the same product at different prices

For price discrimination to exist we need to sell the same products or services to different consumers which would not be possible without fulfilling specific conditions. This is mainly due to the fact that individuals are ration and therefore won’t be willing to spend more on a product than another consumer. For price discrimination to take place three important conditions need to be considered these include; incomplete competition, price flexibility, and arbitrage (simultaneous purchase and sale of an asset to profit from a difference in the price). For a company to operate within a market and be successful with price discrimination, the company must do this through a certain degree of market power. Therefore, the market demand curve should be at a negative slope this therefore creates market power to create price discrimination. Market power is a necessary

Competition within the industry as well as market supply and demand conditions set the price of products sold.

Price discrimination is charging different people for different price for the same products or services. In this modern years, an enormous measure of buyer particular information has been gathered by retailers and advertising organizations. By utilising information mining methods organisations have the capacity induce from these gigantic databases the inclination of individual purchasers. Firms which do not gather information themselves can even now buy pertinent buyer particular data from immediate mailing databases authorities. Online retailers can distinguish the sources through which clients go to their site and price in like manner. For example, the client comes through a Comparison Shopping Engine (CSE) which they will

You are a high powered consultant and have been asked by a large online retailer to help them decide whether or not they should use price discrimination on their website. You have been hired to analyze and present the economic case for and against firms using price discrimination and to provide a recommendation to the retailer as to what they should do. Your report must be no longer than 1000 words. The report must clearly define price discrimination and outline the potential benefits and potential costs of using it. What does the CEO need to know about price discrimination to decide if, when, how, for what goods/services they discrimination should use price discrimination. That is the assignment.

price discrimination is selling the same product to different consumers at different prices, for reasons other than cost. For every goods and services, some consumers are willing to pay more than others, therefore firms that use price discrimination strategy charge different prices in different markets where there are different PED’s. If the product is slightly different it may be product, not price discrimination. The aim of price discrimination is to convert consumer surplus into producer surplus.

Under first-degree price discrimination, every unit is sold for the maximum price each consumer is willing to pay, which theoretically allows the firm to capture the full amount of consumer surplus. However, this requires a tremendous amount of knowledge and information about each consumer and their willingness to pay for a product (Thomas & Maurice, 2013). This can generate more profit than uniform pricing because of the ‘haggle factor’. Sellers who negotiate prices for each individual customer are practicing first-degree price discrimination. If the seller knows their customer has more financial resources, they will try to get a higher price.

Price discrimination is the practice of offering the same product to different consumers at different prices. This policy allows the producer to exploit the differences in elasticity of demand between buyers. A seller of baby formula could charge a higher price in Chinese markets where buyers are willing to pay high prices, and lower prices in the Australian market where buyers are less price sensitive. Price discrimination allows the producer to capture a higher profit between both markets than if they were charging a uniform price (Maskus, 2000, 1275).

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.