24 Facts About Price discrimination

Price discrimination is a microeconomic pricing strategy where identical or largely similar goods or services are sold at different prices by the same provider in different markets.

Price discrimination is distinguished from product differentiation by the more substantial difference in production cost for the differently priced products involved in the latter strategy.

For price discrimination to succeed, a firm must have market power, such as a dominant market share, product uniqueness, sole pricing power, etc.

All prices under price discrimination are higher than the equilibrium price in a perfectly-competitive market.

Price discrimination requires market segmentation and some means to discourage discount customers from becoming resellers and, by extension, competitors.

Price discrimination can be seen where the requirement that goods be identical is relaxed.

Some economists have argued that this is a form of price discrimination exercised by providing a means for consumers to reveal their willingness to pay.

Third-degree price discrimination means charging a different price to different consumers in a given number of groups and being able to distinguish between the groups to charge a separate monopoly price.

When price discrimination exists in a market, the consumer surplus and producer surplus will be affected by its existence.

Price discrimination must have monopoly power to make price discrimination more effective.

Complete price discrimination is most profitable, and requires the seller to have the most information about buyers.

Purpose of price discrimination is generally to capture the market's consumer surplus.

The sum of these areas will always be greater than the area without Price discrimination assuming the demand curve resembles a rectangular hyperbola with unitary elasticity.

Price discrimination is a sign that the market is imperfect, the seller has some monopoly power, and that prices and seller profits are higher than they would be in a perfectly competitive market.

Price discrimination can be facilitated by inventory controls in oligopoly.

True price discrimination occurs when exactly the same product is sold at multiple prices.

Gender-based price discrimination is the practice of offering identical or similar services and products to men and women at different prices when the cost of producing the products and services is the same.

The EU has banned this practice; however, there is evidence that it is being replaced by "proxy Price discrimination", that is, Price discrimination on the basis of factors that are strongly correlated with gender: for example, charging construction workers more than midwives.

The users in lower-income countries benefit from price discrimination by paying fewer subscription fees than those in higher-income countries.

Welfare consequences of price discrimination were assessed by testing the differences in mean prices paid by patients from three income groups: low, middle and high.

Secondly, there was price discrimination according to social status, with three high status occupational groups having the highest probability of receiving some level of discount.

For example, airlines routinely engage in price discrimination by charging high prices for customers with relatively inelastic demand - business travelers - and discount prices for tourist who have relatively elastic demand.

In return, this cross-side effect will differentiate price discrimination in matching intermediation from the standard markets.

Price discrimination only happens when the same product is sold at more than one price.