Why do marketers charge customers different prices for the same product or service?

The purpose of price discrimination is to capture the market’s consumer surplus. Price discrimination allows the seller to generate the most revenue possible for a product or service.

Why do stores charge different prices for the same product?

Supermarkets pay different prices for the same product through distributors. Some stores pay what’s listed in the distributor’s catalog, while others get a blanket discount off of all products, based on volume. The more product (collectively) that a retailer purchases, the larger their discount.

When the price discrimination is possible?

Distance of Two Markets: Price discrimination is possible when the two markets or markets are separated by large distance or tariff barriers, so that it is not possible to transfer goods from a cheaper market to dearer markets.

What is required for price discrimination?

Three factors that must be met for price discrimination to occur: the firm must have market power, the firm must be able to recognize differences in demand, and the firm must have the ability to prevent arbitration, or resale of the product.

Is it legal to charge different prices to different customers?

Charging different prices to different customers is generally legal. The practice could be illegal, however, if the reason for the difference were reliance on a “suspect category” – race, religion, national origin, gender, or the like. The practice could also be legal if it violates antitrust or price-fixing laws.

Can a seller charge different prices for the same commodity?

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.

Should online stores charge different prices for different shopping habits?

According to the study, 87 percent of people surveyed strongly objected to the practice of online stores charging people different prices for the same products based on information collected about their shopping habits.

What is an example of a price difference?

These include: price differences in the sale of identical goods that cannot be justified on the basis of cost savings or meeting a competitor’s prices; or promotional allowances or services that are not practically available to all customers on proportionately equal terms.