Price discrimination
What is Price Discrimination?
- Businesses sometimes sell the same product or service to different customers for different prices. This is known as price discrimination.
- This practice is almost impossible if a firm is selling a good or service in a competitive market.
The lessons to be learned
1. Price discrimination is a clever strategy for a monopolist whose goal is to maximise their profits.
2. To price discriminate a monopolist must be able to separate their customers in relation to their willingness to pay. Customers can be separated by their age, income, class and also geographically.
3. Price discrimination can boost economic welfare.