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[7] [8] [2] Price discrimination is distinguished from product differentiation by the difference in production cost for the differently priced products involved in the latter strategy. [2] Price discrimination essentially relies on the variation in customers' willingness to pay [8] [2] [4] and in the elasticity of their demand.
Price discrimination may improve consumer surplus. When a firm price discriminates, it will sell up to the point where marginal cost meets the demand curve. Some conditions are required for price discrimination to exist: Firms must face a downward-sloping demand curve, i.e. the demand for a product is inversely proportional to its price.
Discount prices is also a type of gender-based price discrimination that segmenting customers based on the factor of gender. A common gender-based price discount is a "ladies' night" promotion, in which female patrons pay less for alcoholic drinks or a lower cover charge than male patrons do. [6]
Predatory pricing is a commercial pricing strategy which involves the use of large scale undercutting to eliminate competition. This is where an industry dominant firm with sizable market power will deliberately reduce the prices of a product or service to loss-making levels to attract all consumers and create a monopoly. [1]
This can then possibly open the door for price gouging. Read more: Why people who work ... You can also tell politicians and media outlets when you spot price discrimination — and let companies ...
The Robinson–Patman Act (RPA) of 1936 (or Anti-Price Discrimination Act, Pub. L. No. 74-692, 49 Stat. 1526 (codified at 15 U.S.C. § 13)) is a United States federal law that prohibits anticompetitive practices by producers, specifically price discrimination.
Trump has argued that tariffs compel American companies to make goods on U.S. soil rather than purchasing from foreign suppliers. But some companies have other plans.
Firms use price discrimination to increase profits by charging different prices to different consumers or groups of consumers. Price discrimination may be regarded as an unfair practice used to drive out competitors. [8]