Price Discrimination

Price Discrimination
A pricing strategy that charges customers different prices for the same product or service. In pure price discrimination, the seller will charge each customer the maximum price that he or she is willing to pay. In more common forms of price discrimination, the seller places customers in groups based on certain attributes and charges each group a different price.

Price discrimination allows a company to earn higher profits than standard pricing because it allows firms to capture every last dollar of revenue available from each of its customers. While perfect price discrimination is illegal, when the optimal price is set for every customer, imperfect price discrimination exists. For example, movie theaters usually charge three different prices for a show. The prices target various age groups, including youth, adults and seniors. The prices fluctuate with the expected income of each age bracket, with the highest charge going to the adult population.

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  • price discrimination — the practice of offering identical goods to different buyers at different prices, when the goods cost the same. [1955 60] * * * Practice of selling goods or services at different prices to different buyers, even though sales costs are the same… …   Universalium

  • price discrimination — Charging one customer more than another for the same article or service. Accepting the doctrine that it is unlawful for anyone engaged in interstate commerce to discriminate in price between customers, we would accept the further doctrine that… …   Ballentine's law dictionary

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  • price discrimination — UK / US noun [uncountable] business the practice of charging different prices for the same product or service in different markets …   English dictionary

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