Many industries practice price discrimination, including the entertainment industry, the consumable goods industry and the client services industry. Each one of these industries provides a good example of the three types of price discrimination, which is the act of charging different prices for the same good or service.

The entertainment industry practices third-degree price discrimination; different consumer groups are charged different prices for the same good. If a consumer is going to the movies, for example, and he pays for a $15 ticket, and his elderly grandmother pays only $8 for the same ticket, he is experiencing third-degree price discrimination. The senior consumer group is charged less than the average consumer for the same ticket.

The consumable goods industry practices second-degree price discrimination when different prices are charged based on the quantity purchased. If a consumable good costs $10, but a quantity discount is offered to consumers who purchase 10 or more of that good, they would be experiencing second-degree price discrimination.

Finally, many industries involving client services practice first-degree price discrimination, where a company charges a different price for every good or service sold. When a service is offered to a client, the price is often based on the value it brings to that client and the amount that client can pay. If a management training company works with IBM, for example, it would charge much more for the same services than if it was working with a small business owner. This type of price discrimination is also known as perfect price discrimination, since a company can capture 100% of the consumer surplus.

  1. What are the different types of price discrimination and how are they used?

    Learn the difference between the three major types of price discrimination and how each is used in practical business applications. Read Answer >>
  2. 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 >>
  3. Why is there a negative correlation between quantity demanded and price?

    Learn what the law of demand is, the basic assumption of the law of demand, and why there is a negative correlation between ... Read Answer >>
  4. What are some examples of the law of demand in real markets?

    Find out how the price of a good or service affects the quantity demanded, and explore instances of consumption reflecting ... Read Answer >>
  5. Which economic factors most affect the demand for consumer goods?

    Understand how key economic factors such as inflation, unemployment, interest rates and consumer confidence affect the level ... Read Answer >>
Related Articles
  1. Tech

    Big Data in Financial Services Comes With Some Risks

    Big data is playing a larger role in finance but its application does not come without risks.
  2. Small Business

    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.
  3. Insights

    Google Shares Its Pay Methodology in Response to Discrimination Claims

    Google is confident it has managed to avert a pay gap.
  4. Financial Advisor

    Manage Your Clients' Expectations

    You can't control how they react to the market, but you can help them understand the reality of the situation.
  5. Insights

    Why The Prices Of Sports Tickets Vary So Much

    Prices of NBA, NHL, MLB and NFL tickets may vary for a number of reasons.
  6. Financial Advisor

    The Next Generation of AUM: Finding Younger Clients

    Advisors who are able to reach younger workers can increase their assets under management.
  7. Personal Finance

    That Job-Hunting Site Might Be Designed to Shut Out Older Applicants

    Older workers using online job-hunting sites may be shut out by web barriers before they ever get to the interview.
  8. Personal Finance

    Surprising Way to Save on Two or More Airline Tickets

    A quirk in the reservations system can make you pay extra if you don't use this special technique for buying multiple tickets online.
  9. Tech

    Are Your Financial Advisor Fees Competitive?

    Are the fees you charge your clients for financial planning competitive? Here's how to determine if they are in line with the competition.
  10. Personal Finance

    When (And How) To Fire A Client

    Firing the clients who take more of your time and effort than the revenue they contribute is a great way to improve your bottom line.
  1. Price Discrimination

    Price discrimination is a pricing strategy that charges customers ...
  2. Age Discrimination in Employment Act of 1967

    The Age Discrimination in Employment Act of 1967 is a U.S. statute ...
  3. Americans With Disabilities Act (ADA)

    The Americans with Disabilities Act prohibits discrimination ...
  4. Effects Test

    The effects test is a method to assess the discriminatory impact ...
  5. Multiple Discriminant Analysis - MDA

    A statistical technique used to reduce the differences between ...
  6. Price Maker

    A price maker is an entity with a monopoly that has the power ...
Trading Center