Analysis of Price Discrimination Research Paper

Analysis of Price Discrimination - Research Paper Example Product pricing also depends on the availability of competitors in the market and certain rules and regulations of the land. Price discrimination is generally resorted for deeper penetration into the marketplace, to attract more customers from competitors or to attract certain segments. Price discrimination also might be used as a predatory pricing tactic, for setting prices below cost to certain customers, to harm competition at the supplier's level. At times this leads to legal battles. Price discrimination, also known as differential pricing may be defined as the practice by a company of charging different prices to the same buyer or to different buyers for the same commodity or service without corresponding difference in cost. This way we can define three classes of discrimination; Second-degree discrimination: The company charges different prices for blocks of units instead of for individual units e.g. different rates charged by an electricity undertaking for light and fan, for domestic power and for industrial use. Third-degree discrimination: As long as the demand elasticities among different customers are unequal, it will be profitable for the company to group the customers into separate classes according to elasticity, and charge each class a separate price. Some example of price discrimination: Airlines offering a huge discount on the destinations towards not very popular routes. Cinema and theater halls offering discounted tickets to students. Car rental firms cutting prices at weekends. The hotel offers discounted weekend breaks. Air-conditioner and refrigerator companies offering discriminatory pricing during winters. Travel agencies offering discounts for families during the school holidays. Computer manufacturers offering bargain prices when they go for newer versions and intend to offload the existing version quickly. Or sometimes when newer versions arrive in the market simultaneously from more than two manufacturers, then also to attract the customer we see price wars. Newspapers companies offering invitation prices for long duration or during weekends. Â