PRICE DISCRIMINATION Meaning and
Definition
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Price discrimination is an economic practice that involves charging different prices for the same product or service to different groups of consumers. Also known as price differentiation, it is a strategy employed by businesses to maximize profits by capitalizing on variations in demand and consumers' willingness to pay.
In price discrimination, businesses divide consumers into distinct market segments based on characteristics such as age, location, income, or purchasing behavior. Prices are then set differently for each segment, with the aim of extracting the maximum possible price from each group. This practice allows businesses to charge higher prices to consumers with a higher willingness to pay, while offering discounts to those with lower purchasing power.
Various techniques are employed to implement price discrimination, including first-degree, second-degree, and third-degree price discrimination. First-degree price discrimination refers to the ideal scenario where a business charges each individual consumer a unique price based on their specific willingness to pay. Second-degree price discrimination involves offering different prices based on the quantity purchased, such as bulk discounts. Third-degree price discrimination involves setting different prices for distinct consumer groups, often based on factors like age or location.
While price discrimination enables businesses to increase their revenue by capitalizing on consumer heterogeneity, it may also result in unfair outcomes and reduced consumer welfare. However, in some cases, price discrimination can be seen as a means to increase access to goods or services by offering lower prices to certain consumer groups.
Common Misspellings for PRICE DISCRIMINATION
- orice discrimination
- lrice discrimination
- -rice discrimination
- 0rice discrimination
- peice discrimination
- pdice discrimination
- pfice discrimination
- ptice discrimination
- p5ice discrimination
- p4ice discrimination
- pruce discrimination
- prjce discrimination
- prkce discrimination
- proce discrimination
- pr9ce discrimination
- pr8ce discrimination
- prixe discrimination
- prive discrimination
- prife discrimination
- pride discrimination
Etymology of PRICE DISCRIMINATION
The term "price discrimination" comes from the combination of two words: "price" and "discrimination".
The word "price" traces its origin to the Old French word "pris" which means "value" or "worth". It further derives from the Latin word "pretium", which also means "price" or "reward".
The word "discrimination" originates from the Latin word "discriminatio", which means "distinguishing" or "differentiating". It is derived from the verb "discriminare", meaning "to separate" or "to distinguish".
When combined, "price discrimination" refers to the practice of charging different prices for the same product or service based on various factors such as customer type, location, or timing.
