Price Discrimination

Loading the player...

What is 'Price Discrimination'

Price discrimination is 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.

BREAKING DOWN 'Price Discrimination'

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.

RELATED TERMS
  1. Americans With Disabilities Act ...

    Legislation passed in 1990 that prohibits discrimination against ...
  2. Lilly Ledbetter Fair Pay Act

    A law signed by Congress on January 29, 2009, that restored worker ...
  3. Regulation B

    A regulation intended to prevent discrimination against applicants ...
  4. Multiple Discriminant Analysis ...

    A statistical technique used to reduce the differences between ...
  5. Customer Service

    The process of ensuring customer satisfaction with a product ...
  6. Cash Charge

    Typically a one-time charge off that a firm makes against its ...
Related Articles
  1. Economics

    What is Price Discrimination?

    Price discrimination occurs when a company charges different customers different prices for the same goods or services.
  2. Professionals

    8 Things Employers Aren't Allowed To Ask You

    In their eagerness for gainful employment, many people may overlook these improper interview questions.
  3. Economics

    What's Involved in Customer Service?

    Customer service is the part of a business tasked with enhancing customer satisfaction.
  4. Professionals

    8 Things Employers Aren’t Allowed To Ask You

    Frequently, an eager job seeker overlooks certain interview questions that are improper, but there are situations where these questions are illegal.
  5. Entrepreneurship

    2 Key Tactics Retailers Use To Increase Sales

    Many companies use versioning and bundling to increase sales. These strategies can offer value to consumers, but they also mean higher costs.
  6. Investing News

    What Affirmative Action Means for Businesses

    A look at what Affirmative Action means for your business.
  7. Personal Finance

    Your Boss Can't Do That! Laws That Protect Workers

    By federal law, American employees enjoy many legal protections that– among other things– provide a minimal level of income and make the workplace safer.
  8. Fundamental Analysis

    The Importance Of Analyzing Accounts Receivable

    While investors often focus on revenues, net income, and earnings per share, they should not overlook the importance of analyzing accounts receivable.
  9. Active Trading

    Qualitative Analysis: What Makes A Company Great?

    To understand the qualities that make for a great company, investors must dig deep into "soft" metrics.
  10. Entrepreneurship

    Hiring? Regulations Small Businesses Need to Know

    When a small business becomes an employer, it has new responsibilities. Make sure you familiarize yourself with regulatory requirements.
RELATED FAQS
  1. What are the different types of price discrimination and how are they used?

    Understand the difference between the three major types of price discrimination and how each is used in practical business ... Read Answer >>
  2. What is the difference between product differentiation and price discrimination?

    Learn about product differentiation and price discrimination, how the two strategies are used in marketing and economics, ... Read Answer >>
  3. What is the difference between consumer surplus and economic surplus?

    Learn the difference between consumer surplus and economic surplus, how the concepts are related and the important theoretical ... Read Answer >>
  4. Why are economists interested in the consumer surplus?

    Understand why an economist would be interested in consumer surplus. Learn why an economy would want to maximize consumer ... Read Answer >>
  5. How does a merger affect the customer?

    Learn how a merger may affect customers of the industry. The effects of mergers may be positive or negative, but there's ... Read Answer >>
  6. How can I prevent commissions and fees from eating up my trading profits?

    First off, understand that there is no universal system regarding trading commissions charged by brokerage firms. Some charge ... Read Answer >>
Hot Definitions
  1. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  2. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  3. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  4. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
  5. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
  6. Sharing Economy

    An economic model in which individuals are able to borrow or rent assets owned by someone else.
Trading Center