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  • Pricing Strategies

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    Harry Fish
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    The document discusses pricing strategies and price discrimination. It defines conditions required for price discrimination, such as producers having price setting ability and consumers having different price elasticities of demand. It describes ways to separate consumers, such as by time, age, income, or location. It then defines three degrees of price discrimination - perfect, second degree involving bulk discounts, and third degree involving different prices to different market segments. Finally, it outlines reasons for price discrimination, such as gaining higher revenue and using profits from some consumers to lower prices and compete in other segments.

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    The document discusses pricing strategies and price discrimination. It defines conditions required for price discrimination, such as producers having price setting ability and consumers having different price elasticities of demand. It describes ways to separate consumers, such as by time, age, income, or location. It then defines three degrees of price discrimination - perfect, second degree involving bulk discounts, and third degree involving different prices to different market segments. Finally, it outlines reasons for price discrimination, such as gaining higher revenue and using profits from some consumers to lower prices and compete in other segments.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
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    3 views1 page

    Pricing Strategies

    Uploaded by

    Harry Fish
    The document discusses pricing strategies and price discrimination. It defines conditions required for price discrimination, such as producers having price setting ability and consumers having different price elasticities of demand. It describes ways to separate consumers, such as by time, age, income, or location. It then defines three degrees of price discrimination - perfect, second degree involving bulk discounts, and third degree involving different prices to different market segments. Finally, it outlines reasons for price discrimination, such as gaining higher revenue and using profits from some consumers to lower prices and compete in other segments.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
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    of 1

    9.11.

    2022

    Pricing Strategies and Price Discrimination

    Conditions:

    Producers have price setting ability

    Consumers must have different PED for the good or service

    Consumers must be able to be separated (requires information/sufficient market intelligence)

    No arbitrage (selling between consumers) – no secondary markets

    Separating the Market

    Time (Peak/Off-Peak), Age, Gender, Income (First/Standard Class), Geographical Distance, Types of
    consumer e.g. business or domestic consumers

    Price Discrimination

    First Degree (or perfect): each individual charged the highest price they are willing to pay

    Second Degree: when there is surplus, they put special prices (offers) – bulk buying – wholesale
    markets

    Third Degree: when a firm charges different prices for the same product in a different segment of
    the market

    Why

    Enables producers to gain a higher level of revenue through eroding consumer surplus

    Firms can invest more

    Can manage demand easier by spreading it across at different times

    Enables the producer to produce more of the good/services and gain from economies of scale

    Price discrimination may drive out competitors through using profits made in the inelastic segment
    of the market to lower prices and undercut rivals in the elastic segment

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