* A firm engages in price discrimination when it charges difference prices for different units of the same good AND charges a higher price of units for which the willingness to pay is high than for those units of which WTP is low…
Yet one more point of contention was the price discrimination between various purchasers, only if that discrimination reduces the competition or tends to create a monopoly, any arena of commerce.…
There are a variety of different business structures that comprise the market in the world today. The most common ones found in the business world today are sole proprietorships, partnerships, and corporations. From these you will also find monopolies and oligopolies. Economists assume there are a number of different buyers and sellers in the market which leads to competition which allows prices to change in response to changes in supply and demand.(1) In many industries you there are substitutes for products, so if one type of product becomes too expensive the consumer can choose an alternative product that is cheaper, or one of better quality. This is called perfect competition within different companies. However, in some industries there are no substitutes for a product. In a market with only one supplier of a good or service, the producer can control the price meaning that the consumer does not have a choice, cannot maximize his or her total utility, and has very little to no influence over the price of the good or service they require. This is called a monopoly, where the single business is the industry. In slight contrast, you have the oligopoly which is at least two companies competing for market share. In an oligopoly, products are usually very similar, if not identical to each other, and in order to make their product more attractive they will lower their prices, forcing the other one out of the market until that firm lowers their price. Finally, the fourth type of business structure is called monopolistic competition. Like an oligopoly, these firms produce similar or identical products where substitute products usually aren’t available, although monopolistic competition is between many firms, where an oligopoly is usually two or three different companies controlling the market. In monopolistic competition, a firm takes the prices charged by its rivals as given…
A seller charging competing buyers different prices for the same "commodity" or discriminating in the provision of "allowances" — compensation for advertising and other services — may be violating the Robinson-Patman Act. This kind of price discrimination may give favored customers an edge in the market that has nothing to do with their superior efficiency. Price discriminations are generally lawful, particularly if they reflect the different costs of dealing with different buyers or are the result of a seller's attempts to meet a competitor's offering.…
Companies that set a higher price in their market to attract competitors usually do to attract a certain profile of customers. Having a higher priced product usually means that they are carrying a more quality or more unique product. Certain buyers will attract to this to set them selves above the norm. Some companies can set their pricing higher because the customer knows that they will be getting the best of the best and knows that quality behind the product. When I think of an example of this, Mercedes automobiles comes to mind. They set themselves apart from their competition with the overall quality of their line of cars and SUVs. They are able to price their vehicle above the competition and are able to attract a market that is willing to purchase their automobiles at a higher price because the customer knows that when they buy a Mercedes they are getting into a higher class of car that is above the mid level automobiles.…
Price is the cost in which the consumer is willing to pay for the product. For example, a car dealership has a suggested retail price. However, very rarely do they sell a car at that specific price. Most consumers will negotiate a lower price to suit his or her needs, wants, and desires. This would include “offering discounts, trade-in allowances, and credit terms” (Perreault et al, 2010, p. 51). In doing this, the dealership is altering the price of the automobile to the competitive circumstances and then the consumer chooses whether to purchase a vehicle from that particular dealership.…
Oligopolists sometimes engage in price competition when other attempts to gain market share fail. The result is lower prices, increased output, and smaller profits. Since price competition is typically self-defeating in an oligopoly, rival firms usually attempt to differentiate their product to gain market share.…
Prices are light traffic signals in an economy. They self-regulate the economy and are critical to a market. That is why socialism and its attempts to set prices cannot function properly because it never allows for the true price to be discovered.…
D) In order to apply perfect price discrimination, a firm should know each individual consumer’s maximum willingness to pay.…
First, monopolies could overcharge people for simple items without caring about the quality of the product. “Overcharging or price discrimination allows a monopolist to increase its profit by charging higher prices for identical goods to those who are willing or able to pay more,” (Burgan, 1).…
In the United States patent laws allow innovators to produce and sell their products for a period of 20 years before it is copied. Therefore, allowing money and time to invest in their products, by letting them recoup some of their losses that occurred when research as well as development was being done. Price discrimination happens all the time this usually happens when firms have a great share of market power and is based on what consumers are willing to pay. Therefore companies can run into trouble if they merge with other companies because it’s a violation of antitrust regulations. A good example of this would be AT&T trying to purchase T-Mobile because it would give AT&T more power over its competitors within the wireless community. Another example would be South Korea offering prices for automobiles to the Unites States at a lower rate due to multiple substitutions that are within the states, but being there aren’t as many in South Korea, therefore firms are able to charge more money for the same…
People are aware when they fly that they might be seated next to someone that might have paid half the price that they did, or even one third of the price for the same airplane ticket. However, to what extent it is a result of targeted price discrimination or simply demand and supply, is a question worth investigating. Price discrimination is “the action of selling the same product at different prices to different buyers, in order to maximize sales and profits” (Blink and Dorton 2012, pg.133). In order to price discriminate certain requirements must exist. These include varied consumer elasticities, the ability to separate the markets, price setting ability and lastly, it must be an identical product which cannot be resold (Blink and Dorton…
Price discrimination is the business practice of selling the same good at different prices to different customers. Financial aid at colleges is the practice of offering discounts to some students based on their ability to pay. The students with the least ability to pay are offer lower prices or even 100% free tuition. Occasionally students even receive free room and board. The reason why financial aid for college is categorized as price discrimination, is because the student who do have solid financial wealth to pay for college are presented with a much more expensive education, than poor students are offered. Thus wealthy students are being discriminated against when it comes to the price of their college education…
• Pricing amongst competitors in the same product category plays a vital role compared to pricing amongst for example, carbonated soft drinks etc.…