Price discrimination is when a company changes its price considering any of a number of different variables. These variables can be age, ethnicity, nationality, time, location and many others. This is done in order to maximize the profits or sometimes in order to encourage some kind of an action.
A good example of how it is used sometimes is how Airlines use the variable of time to change the prices of their tickets drastically. Depending on how much time of antecedence you buy your ticket the lower the price you will get. This is a way the airlines have to profit upon the urgency and the willingness of the client to buy their tickets. So if the buyer has the absolute necessity to travel somewhere the next day they will have to pay a larger sum which will increase the company`s profit and therefore revenue. This also tests the client`s purchasing power, for it comes to a point which is almost like a first degree price discrimination (that is, a auction0 which explores of the buyers willingness and capacity to buy the ticket.
There are obviously some reasons why price discrimination would be acceptable, for example auctioning goods which values cannot be predicted by the market (rare and unique goods) or even the attempt to encourage a population to visit its own heritage centers. As can be seen in museums which will charge less for a citizen of the country then they would charge a tourist.
Obvious explorations can also be seen, for example goods bought in tourist centers will be several times more expensive than if bought in local areas.
Nice post, Max. I thought the post was about racial discrimination until I read the it. Good work!
When I looked at a lot of people’s post about price discrimination, they mostly regarded about people’s age. However, I like how you took further and decided to talk about nationality and ethnicity.
Written on: 2/27/10