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.
Price discrimination involves market segmentation. A firm price discriminates when it charges different prices to different consumers for reasons that do not reflect cost differences. Price discrimination involves extracting consumer surplus from buyers and turning this into additional revenue and profit.
EXAMPLES OF PRICE DISCRIMINATION :
The following are the examples of Price Discrimination are as follows;
• Communication Industry (Peak and Off-Peak Pricing) :
In Pakistan Peak and off-peak pricing and is common in the telecommunications industry, which charges different prices at different times on different packages for different person.
• Travel Industry :
Airlines and other travel companies use differentiated pricing regularly, as they sell travel products and services simultaneously to different market segments. This is often done by assigning capacity to various booking classes, which sell for different prices and which may be linked to fare restrictions.
• Car Rental Firms:
These are the firms that increases the rent of the cars at weekends with compare to other working days.
• Early Bird Specials:
Restaurants charge special, lower prices for dinners at midnight.
• Movie Theaters:
Theaters are charging different prices for different shows on different days.
Peak and off-peak pricing and is common in the telecommunications iht.