Price Discrimination – An Overview
Price discrimination is defined as an important technique that exists in the monopolist competition to facilitate buyers to pay as per their ability. A monopolist enjoys a superior position and have complete control over the supply or respective prices so that consumers with different abilities can be made to pay accordingly. So, to define it in simple words, in this approach sellers offer similar category or group of products that are produced with similar cost range but are sold at different prices to various buyers. Such distinct approach is termed as Price Discrimination.
This condition is not prevalent under perfect competition, since there are many sellers who reproducing and selling similar kind of products leaving the buyers with choices to switch their sellers. Also, the price change is not that easy since when a firm changes the prices, market forces pushes the price back to its original value. As a matter of fact, under a perfect competition price is set by the market forces leaving the sellers to act as price takers and not as price makers. They need to therefore adjust their produce and costing accordingly. So, price discrimination is only possible under monopoly wherein a firm has complete authority and control over the scale of production, cost and final price that can be discriminated among buyers.
What are the Condition Under Which price Discrimination Happens?
For students seeking Price Discrimination Assignment Help, it is essential to understand the reason behind such condition. As a matter of fact, not all price differences showcase price discrimination since this totally depends on the various scenarios. Such instances can be where sellers offer huge quantity discounts, variation falling amidst wholesale and retail prices, change in prices due to change in season. Such instances do not get clubbed under the category of price discrimination since the same goods are at a different time period, within a different scheme in a different place in different season. The financial market is formed by the combination of Capital Market and Money Market wherein price discriminations can be easily viewed. In fact, price discrimination is precise strategy wherein varying prices are imposed on different consumers for similar goods or services.
What are Discrimination Types Studied in Price Discrimination?
The price discrimination assignment help details various degrees / stages of price discrimination. Two of the most significant are discussed below:
- In the first degree, the technique is known as perfect price discrimination. This happens when a company decides to levy high level of charges on all units. This leads to a major level of price variation wherein its value faces financial fluctuations. Therefore, it enables a firm to take charge of all the existing extra units much ahead of their competitors.
- In the second degree, price discrimination happens on the sellers’ part. In this situation they fail to spot the difference between different types of consumers.
What are the Foremost Ideal Conditions for Price Discrimination to Happen?
- For such discrimination to happen, it is important that market has imperfect competition. This will make the firm a price maker wherein demand curve must be sloping downward.
- Also, a company is required to set the markets separately along with already present resale.
- Various group of customers must report demand elasticity.
Instances and Advantages studied in Price Discrimination
- With the existence of price discrimination, a fir gets to increase its revenue by selling goods to the untapped buyers as they will be getting allured by low price offers.
- Under this, a company finds itself clear about imposing their decisions by merging these with customer-oriented schemes.
Some of the instances of price discrimination wherein a firm imposes variation in prices are owing to purchase of service or product in a large volume. Apart from this, variation happens in pricing tagged for premium products, application of discount coupons, seasonal discounts in flight tickets etc.
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