Price Discrimination

Price dissimilitude is the practice of selling a special good or good at more than matchless terms when the price differences are not related to address differences (McConnell 207). Sellers use price diversity to take advantage of consumers willingness to pay and increase their total revenue. The use of price discrimination is increasing in frequency as traffickers are adequate to use software packages that provide actual consumer responses to assorted determine (Kotler 400). Pricing based on different consumer characteristics has a great impact on a companys net income (Huang 322).
Price discrimination is not available to all sellers in a market. There are three conditions that are indispensable before sellers can institute price discrimination. First, the seller inevitably to be a monopolist or in close to circumstances an oligopolistic and have control everywhere output and price. If the seller has no market power and no ability to take the price they would be in a pure emulation market and all goods would be sold at mavin price. Second, the seller enquires to be able to divide consumers into manifest aggroups. Each group will have a different willingness or ability to pay for the output or aid (McConnell 208). If the consumers had identical demands for a good, then they would all demand the homogeneous amount for each price.



This would not allow market segmentation. Finally, the vendee has to be restricted from being able to resell the product or service. A charge of higher prices to one group would be useless if resale was not restricted (McAfee 465). Sellers also need to look at the elasticity of their good or service to determine if price discrimination will be profitable. At any price where the elasticity is less than one, a price increase is profitable (McAfee 467).
It is important to distinguish price discrimination from price differentiation and predatory pricing. Price differentiation of a product gives the seller a larger control over the price and the potential to charge consumers...If you want to get a full essay, order it on our website: Ordercustompaper.com



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