price discrimination


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price discrimination

the ability of a supplier to sell the same good or service in a number of separate MARKETS at different PRICES. Markets can be separated in various ways such as by different consumer requirements (for example bulk and low volume gas supplies to industrial and household consumers, respectively); by the nature of the product itself (for example original and replacement components for washing machines) and by geographical locations (for example domestic and foreign markets). In order for price discrimination to be viable, markets must differ in their demand profiles (that is, exhibit different demand elasticities, so that higher prices can be charged where demand is inelastic and lower prices charged when demand is elastic), and the supplier must be able to ‘seal off each market so that customers in lower-priced markets cannot resell to those in higher-priced markets.

Price discrimination can help a supplier to increase his sales and profits, improve market share and contribute to the full capacity utilization of manufacturing plant.

However, price discrimination may be exercised by a DOMINANT FIRM in a predatory manner aimed at removing troublesome competition or as a means of exploiting buyers. See OFFICE OF FAIR TRADING, ELASTICITY OF DEMAND, PRICE-SQUEEZE, DEMAND-BASED PRICING.

price discrimination

the ability of a supplier to sell the same product in a number of separate MARKETS at different prices. Markets can be separated in a number of ways, including different geographical locations (e.g. domestic and foreign), the nature of the product itself (e.g. original and replacement parts for motor cars) and users’ requirements (e.g. industrial and household electricity consumption). Price discrimination can be both beneficial and detrimental. For example, discriminating prices may be used as a means of ensuring that a plant produces at full capacity, thereby enabling economies of large-scale production to be attained. On the other hand, price discrimination may be used as a means of enlarging monopoly profits. See DISCRIMINATING MONOPOLIST.
References in periodicals archive ?
Congress did not prohibit all price discrimination, only discrimination resulting from buyer power not justified by cost and other efficiencies.
identify as relevant, we pursue an exploratory approach and develop four dimensions that reflect firms' pricing capability: price discrimination, performance goal orientation, dynamic orientation, and value delivery.
We will then discuss the connection between common grace and authentic relationship and explore how a company's approach to price discrimination might play out when adopting an authentic relationship philosophy.
The Robinson-Patman Act, which prohibits price discrimination, sought to remedy two types of harm to competition.
The only patients who are charged full price are those who pay out-of-pocket, which leads us to the concept of price discrimination.
were forbidden from engaging in price discrimination, many customers who
Will sport companies be able to determine individual price elasticities of demand and price to each individual accordingly, or will customers be able to thwart those first degree price discrimination efforts by jumping the rate fence and pretending to be low demand customers?
As we show in this comment, their result is based on a fundamental mistake (they allow the addition of negative demanded quantities) and on a change in the social welfare function under uniform pricing in comparison with that function under third-degree price discrimination.
Introducing price discrimination and prioritization will significantly harm consumers and the functioning of the Internet
Abstract: A parsimonious theoretical model of second degree price discrimination suggests that the business cycle will affect the degree to which firms are able to price-discriminate between different consumer types.
The Association of British Insurers estimates that the decision will actually reinforce price discrimination, with women drivers under 26 in the UK facing a 25% rise in car insurance rates, with a 10% drop in rates for all for men.
Gerardi of the Federal Reserve Bank of Atlanta have taken a look at price discrimination and its role in the airline industry.