Discussion

Description

Reply number 1:

Price discrimination is the strategy of charging a different price for the same good or service (Twin, 2021). In pure discrimination, the seller charges the maximum price the customer can pay (Twin, 2021). There are three types of price discrimination – first-degree, second-degree, third-degree price discrimination, and fourth-degree price discrimination.

In the first-degree price, a discrimination store charges the maximum price consumers are willing to pay.

In second-degree stores charging different prices depending on the number of choices of the consumer. In Third-degree price discrimination, the charges defer on a particular market segment, e.g. age profile, income group, time of use. In fourth-degree price discrimination – when prices to consumers are the same, but the producer faces different costs.

For example, third-degree price discrimination considers the marketing at gas stations stating price cut on 2 days a week but doesn’t mention which days on the advertising (Pettinger, 2019). The logic is that only the most price-sensitive consumers will take the trouble to find out which two days have cut-price fuel and then drive to the petrol station on those days. Rest will see the sign of price cuts and continue to buy when convenient for them.

If you buy a 12 pack of toilet rolls, it is probably cheaper than buying a smaller quantity. The advantage to the company would be a better use of space and clear their existing stocks quickly when required. Firms can benefit from the economies of scale which arise from increased output and production (Pettinger, 2019).

Reply number 2:

Price discrimination is a marketing approach in which a vendor charges varying prices for the same product or service depending on what they think the customer will agree to (Twin, 2020). Price discrimination occurs when a merchant charges different prices to different customers for the same product or service. The corporation uses first-degree discrimination to charge the highest feasible price for each unit consumed. Discounts for bulk purchases are considered second-degree discrimination, whereas varying prices for different consumer groups are considered third-degree discrimination. Along with first- and second-degree discrimination, there is third-degree discrimination as well. One of the important facts is, customers are charged different prices for the same products because of a bias toward certain groups of people with certain traits, such as educators against the general public, domestic users against overseas users, or adults against senior citizens.

The airline business is a good example of price discrimination. Airline tickets purchased several months in advance are often less expensive than those purchased at the last minute. Airlines hike ticket rates in reaction to increased demand for a specific flight. And this comes in handy most of the time in a company because it led to effective decisions and profits. In the same scenario as before in the airline industry, when a flight’s tickets aren’t selling well, the airline lowers the price of available seats to try to boost sales. Because many people choose to go home late on Sunday, flights departing early on Sunday morning tend to be more expensive. Passengers on planes usually pay more for extra space. So, in my opinion, price discrimination comes very effectively and useful in an organization.

References

Twin, A. (2020, July 4). How Price Discrimination Comes About. Investopedia. https://www.investopedia.com/terms/p/price_discrimination.asp

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