| Price discrimination is the capability of
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| | capturing all segments of a
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| the seller to supply same products at
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| | market.EasyJet and British Airways have
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| different prices. The prices of the same
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| | different approaches to selling the
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| product might vary during the day period
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| | same product for different prices, both
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| as in case with the ticket prices which
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| | are examples of third-degree
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| are usually higher during the busy hours.
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| | price discrimination. The budget airline
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| The price can also be different when sold
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| | 'Easy Jet' sells all their
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| at different places. It can also depend
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| | seats over the internet - the earliest
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| on the income of the customer, for
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| | booked seats are the cheapest.
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| example pensioners usually pay less.Price
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| | Then as demand rises and supply becomes
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| discrimination can be grouped into three
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| | more finite, the prices are
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| categories or types-
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| | raised, so prices are discriminated with
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| First-degree discrimination where a firm
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| | passengers on a given flight
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| charges each consumer the
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| | often paying very different prices for
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| maximum they are prepared to pay for the
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| | their seats. The traditional
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| product. This is evident at
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| | carrier British airways, on the other
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| stalls or street sellers where the
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| | hand sell at a high price
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| customer bargains directly with the
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| | initially, with price discrimination
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| seller to bring the price of a product
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| | offered on different ticket
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| down to one they find
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| | categories (first class, club class and
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| acceptable.Second-degree discrimination
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| | economy class). But the prices
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| where the prices charged to consumers
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| | may also drop dramatically for standby
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| vary according to the amount they
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| | seats sold close to departure
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| purchase. This is commonly seen in
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| | time as British Airways makes the effort
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| the concept of bulk buying, when greater
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| | to fill seats that would
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| quantities bought results in
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| | otherwise be vacant. The competition
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| lower prices.Third-degree discrimination
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| | between budget and traditional
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| operates when consumers are grouped into
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| | airlines is an example of how consumers
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| two or more separate markets with
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| | can benefit from a competitive
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| different prices in each market.
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| | market, with the advantages of low
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| This is the most common type of price
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| | prices and more choice.Peak load pricing
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| discrimination, with student
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| | is popular in much of the transport
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| discounts, pensioner fares and child
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| | industry, where
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| prices being good examples of
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| | companies try and redistribute usage to
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| this category.When given a number of
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| | off peak periods by putting up
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| separate markets with different
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| | the price at peak times. This can be
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| identifiable demands, a
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| | seen as unfair by many travelers
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| discriminating pricing policy is at
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| | who need to travel at certain times of
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| least as profitable as a
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| | day e.g. commuters getting into
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| non-discriminating one. By
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| | central London by 9am, but conversely,
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| discriminating prices, producers are
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| | it is a benefit to those who
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| appealing to a wider section of the
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| | can plan their journey times to make use
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| market, selling more products and
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| | of cheaper periods.Predatory pricing can
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| therefore increasing turnover, and in
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| | be seen as a form of price discrimination
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| turn, profits, which are then
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| | when
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| available to reinvest within the
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| | new product lines are launched - a
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| company.There are many ways in which
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| | popular method to quickly and
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| consumers can benefit from price
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| | effectively capture a large customer
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| discrimination, in the case of second
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| | base is by introducing a product
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| degree discrimination consumers
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| | at a lower price than its closest
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| can benefit through bulk buying by
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| | competitor. Therefore securing
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| getting more for less - resulting
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| | customers before raising the price. In
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| in a lower average cost. Companies have
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| | this way companies may well
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| found ways to appeal to this
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| | make a loss on the first products that
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| market by using special offers, such as
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| | they sell - but at least their
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| Boots' "3 for 2" offers. The
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| | name is being recognized.One of the most
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| customer benefits by getting more
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| | recent and interesting methods of price
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| products for their money, and Boots
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| | discrimination
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| benefits by shifting products that they
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| | is in the case of Coca-Cola and their
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| have selected more quickly,
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| | new line of technologically
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| they increase turnover but at the cost
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| | intelligent vending machines, which are
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| of a lower margin per unit.
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| | programmed to change the price
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| Economies of scale come into effect
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| | of a can of coke depending on the
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| here, it costs Boots the same for
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| | outside temperature. So, when it is
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| its shop assistants to put 3 products
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| | hot outside a can of coke is more
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| through on the till as it does
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| | expensive, but if cold then price is
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| 2. The company benefits because they
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| | lower. In this case the groups of buyers
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| shift more of a single product in
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| | are segmented by the outside
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| one single purchase.Companies such as
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| | temperature. The company is charging a
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| Makro's have also benefited by adopting
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| | higher price to customers at a
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| this form of
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| | time when they will place a higher value
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| discrimination - opening up a warehouse
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| | on the product, whilst
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| full of products but having a
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| | charging less if their demand (or thirst
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| minimum purchase price (e.g. £40) per
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| | level related to the
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| customer. Quite often, in second
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| | temperature) is lower. The producer is
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| degree discrimination, companies place
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| | cleverly discriminating where
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| restrictions on their special
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| | demands vary with the weather, and
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| offers, these restrictions normally work
| |
| | therefore increasing revenue.
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| in the producers favour, for
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| | Benefits to the consumer are less clear
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| example - reduced entry to a nightclub
| |
| | in this example unless the
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| is only valid before 11pm or in
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| | average price of coke is lower.Modern
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| the case of train tickets, purchases
| |
| | technology has made price discrimination
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| must be made 7days in advance in
| |
| | easier for companies
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| order to gain the lower price.Certain
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| | through the internet - websites such as
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| economic conditions are necessary for
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| | recognize the same
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| price discrimination to
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| | customer when logging into the site and
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| take place. Firstly, the seller must be
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| | therefore can immediately
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| able to set their own price,
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| | present them with a book that they
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| therefore it is impossible in a market
| |
| | recommend they buy, at a different
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| of perfect competition where
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| | price that what they would charge to
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| sellers are price takers (e.g.
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| | another customer logging in.The main
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| agricultural commodity markets). The
| |
| | advantage to a producer of using price
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| markets or consumer groups involved must
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| | discrimination is that
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| be separate with no reselling
| |
| | it allows them to increase turnover and
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| of products must taking place. Demand
| |
| | thus profits. This can be
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| elasticity must be variable in
| |
| | shown in the following graph, which
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| each market, so, in markets that are
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| | illustrates third degree
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| sensitive to price rises, demand
| |
| | discrimination -So, if the firm is to
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| is less elastic, and therefore a higher
| |
| | sell 250units without price
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| price will be charged.The elasticity of
| |
| | discrimination, it
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| demand of a market is highly influential
| |
| | must charge one set price of P1. The
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| upon how a
| |
| | total revenue is shown in the
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| producer decides to price a product.
| |
| | blue shaded area. However, if the firm
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| Sellers can charge low prices
| |
| | can sell 200 of those 250 at a
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| which results in higher consumer
| |
| | higher price of P2 it will gain the red
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| numbers, with a larger market volume.
| |
| | area in addition to the rest.The main
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| Alternatively they could sell at a
| |
| | benefits to the consumer of price
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| relatively high price appealing to
| |
| | discrimination are - price
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| less consumers, therefore sell less, but
| |
| | discrimination is likely to increase
|
| receive a higher marginal
| |
| | output and make the good or
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| revenue on each product. Both methods
| |
| | service available to more people and the
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| have advantages - but if you can
| |
| | increased competition in the
|
| appeal to both of these sectors of the
| |
| | market leads to lower prices and more
|
| market at the same time, then
| |
| | choice. However, higher profits
|
| you benefit from a bigger overall
| |
| | for producers could be seen as an
|
| turnover and a resultant greater
| |
| | undesirable redistribution of income
|
| profit. This is illustrated in the case
| |
| | in society, especially if the average
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| of third degree
| |
| | price of the product is raised.The
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| discrimination. Train companies offer
| |
| | article was produced by the member of
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| the same trip to the same
| |
| | Sharon White is a senior writer and
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| destination at the same time for a
| |
| | writers consultant at term papers. Get
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| variety of prices - including
| |
| | some useful tips for thesis and buy term
|
| student prices, child fares, OAP fares
| |
| | papers .
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| and adult fares, therefore
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| |
|
