Pricing

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Pricing

As per the last class, we discussed extensively about the 2nd and 3rd degree price discrimination. Price discrimination basically means similar goods/services are sold at different prices by the same company in different markets.

To talk about them in detail:

  1. 3rd degree price discrimination –

Third degree discrimination is directly linked to consumers’ willingness to pay and ability to pay for goods/service.

The market is usually divided in two ways: geography or time.

Here, I have personally seen how age segmentation is done for products. For instance, students at ISB are given discounts of 10% at Apple stores. For rail travel, people get 33% off if they have a railcard. This is because different age groups have different elasticities of demand, Students have lower income than working adults, so are more sensitive to changes in prices, thus here 3rd degree of price discrimination works perfectly.