price discrimination versus price differentiation

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Topics: Pricing, Marketing
Price Differentiation vs. Price Discrimination
Price differentiation and price discrimination: two terms used in Marketing and Economy. First of all, it is appropriate to make an accurate definition for both of the terms. Price differentiation is a pricing strategy that “charges different segments of customers altered prices for the same products or services.” Likewise, we can meet with the same definition if we look for price discrimination definition. Then, is there a difference between price differentiation and price discrimination? If yes, what is the difference between them? Firstly, I will try to explain two term and then I summarize an article related with multimarket price differentiation.
Price differentiation is based on the price sensitivity and cost differentials. The types of price differentiation are isolated segments (segmented pricing) and cost justification (Full isolation, different channels, different locations and different times) , bargaining, letting the customer to determine the price, use of marketing catalogs, coupons, and refunds, different product forms/brands and geographical pricing. (Yılmaz, C)
Actually, the term “Price Discrimination” is usually used in Economics; on the other hand, the term “Price Differentiation” is usually used in Marketing and Business. Price Discrimination in the Economics only exists in the Monopoly, Oligopoly, Monopolistically Competitive and Cartel. It is not possible to price differentiate in competitive markets. There are three major types of price discrimination; namely, First Price Discrimination( Perfect Price Discrimination) Second Price Discrimination ( Quality Discrimination) Third Price Discrimination ( Multimarket Price Discrimination)
According to the Microeconomics, a monopoly that uses non-uniform pricing captures additional consumer surplus by raising the price for customers who value the good the most. Likewise, by lowering the good’s price for other customers, the monopoly can



References: http://www.priceintelligently.com/price-differentiation/ Pricing, Presentations of Marketing Strategy Course prepared by Cengiz Yılmaz Perloff, J.M. (2011), Microeconomics with Calculus (Second Edition)Boston: Pearson. Agnieszka, W., & Christine, E. (n.d). Multi-channel price differentiation: An empirical investigation of existence and causes. International Journal Of Research In Marketing, 27142-150. doi:10.1016/j.ijresmar.2010.01.0. Retrieved from http://www.sciencedirect.com/science/article/pii/S0167811610000194

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