StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...
Nobody downloaded yet

Differences Between Degrees of Price Discrimination to Increase Profits - Research Paper Example

Comments (0) Cite this document
Summary
The paper "Differences Between Degrees of Price Discrimination to Increase Profits" analyzes distinctions between the three degrees of price discrimination and the examples of businesses using them to increase their profits and illustrates it with appropriate diagrams…
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER96% of users find it useful
Differences Between Degrees of Price Discrimination to Increase Profits
Read TextPreview

Extract of sample "Differences Between Degrees of Price Discrimination to Increase Profits"

Download file to see previous pages Generally, in Economics, it is assumed that a firm will sell identical products at the same price in all markets. But, it is not the case always and firms may often sell identical products in two or more markets and it may charge different prices, too. According to Stavins (1996), firms have no market power to discriminate price in a perfectly competitive market, but a monopolist can discriminate provided that he has information about consumers’ taste differences and transaction costs (p 3).
Price discrimination occurs when the same commodity is sold at different prices to different customers. It was a generally accepted definition of price discrimination. Philips (1983) argued that there is no price discrimination if the same goods are sold in different places for different prices due to the differences in the cost of carrying goods and so on (p. 5).
According to Armstrong and Porter (2007), price discrimination exists when prices vary across customer segments in manner that cannot be entirely explained by variations in marginal costs (p. 2224). In broad term, price discrimination exists when two similar products which have same marginal cost to produce are sold by a firm at different prices (Armstrong, 2006, p. 1).
In short, price discrimination means:
1) Products with identical costs are sold in different markets for different prices, or
2) The ratio of price to marginal cost is different for identical products (Keat and Young, 2009, p. 393).
Geetika, Ghosh and Choudhury (2008) quoted Pigou (1920), an early economist, as he has identified the major three degrees of price discrimination in his work of ‘The Economics of Welfare’, based on seller’s estimation of consumer’s paying capacity and their willingness to pay for goods or services (p. 291). The three degrees of price discrimination are generally termed as a first degree, a second degree and a third degree price discrimination. ...Download file to see next pagesRead More
Cite this document
  • APA
  • MLA
  • CHICAGO
(Differences Between Degrees of Price Discrimination to Increase Profit Research Paper, n.d.)
Differences Between Degrees of Price Discrimination to Increase Profit Research Paper. https://studentshare.org/macro-microeconomics/1735673-distinguish-between-the-three-degrees-of-price-discrimination-and-then-with-business-examples-and-appropriate-diagrams-show-how-each-can-be-used-by-businesses-to-increase-profits
(Differences Between Degrees of Price Discrimination to Increase Profit Research Paper)
Differences Between Degrees of Price Discrimination to Increase Profit Research Paper. https://studentshare.org/macro-microeconomics/1735673-distinguish-between-the-three-degrees-of-price-discrimination-and-then-with-business-examples-and-appropriate-diagrams-show-how-each-can-be-used-by-businesses-to-increase-profits.
“Differences Between Degrees of Price Discrimination to Increase Profit Research Paper”. https://studentshare.org/macro-microeconomics/1735673-distinguish-between-the-three-degrees-of-price-discrimination-and-then-with-business-examples-and-appropriate-diagrams-show-how-each-can-be-used-by-businesses-to-increase-profits.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document

CHECK THESE SAMPLES OF Differences Between Degrees of Price Discrimination to Increase Profits

Price Differences Associated with Quality

...Differences Between Degrees of Price Discrimination to Increase Profits... Differences Between Degrees of Price Discrimination to Increase Profits... Price Differences Associated with Quality Introduction It is a basic economic concept that a change in product/service quality has a direct impact on that particular product’s/service’s price. Hence, it is widely accepted that difference in quality is an important product characteristic to be taken into consideration while identifying products. Generally, people are willing to pay more for higher quality products whereas they hardly purchase low quality products at higher rate. Therefore, every customer tends to scrutinize product/service quality (if possible) before they make a purchase. Usually,...
5 Pages(1250 words)Essay

Fuel Price Increase in US

...Differences Between Degrees of Price Discrimination to Increase Profits... Differences Between Degrees of Price Discrimination to Increase Profits... How might increases in fuel costs be advantageous for American society There has been a protracted emphasis on the pervasive demerits of fuel price increase in US. Analysts have been underscoring the implications of soaring fuel prices on inflation as every product and service industry depends on this precious commodity. Studies have almost invariably so; been bent on exploring and illuminating the negative impacts of the increase of the price of fuel. The developments (fuel price surge) have nonetheless some notable and particulate merits for the American society. Without taking a utopian and...
6 Pages(1500 words)Essay

Price Discrimination

...Differences Between Degrees of Price Discrimination to Increase Profits... Differences Between Degrees of Price Discrimination to Increase Profits... how the principle of willingness to pay underlies consumer surplus and the practice of price discrimination. Explain the equilibrium solution to an industry that is able to practice perfect price discrimination. Ans: The conception of the consumer's surplus originated from the Marshallian theory of cardinal utility. Hence to establish the relationship between consumer's surplus and willingness to pay we have to go through the theory of cardinal utility and consumer's equilibrium in single commodity case. The cardinal theory of utility is based on the following assumptions. 1. Utility is cardinall...
15 Pages(3750 words)Essay

Analysis of Price Discrimination

...Differences Between Degrees of Price Discrimination to Increase Profits... Differences Between Degrees of Price Discrimination to Increase Profits... of Price Discrimination The dynamics of change is so uncertain that it sets up entirely new consumption patterns and hence new paradigms in the context of marketing. Marketing changes are always linked to the profile of the consumer and methods of consumption. Winners will invariably be those companies that are offering more value for the customer’s money. The satisfaction level for a service or a product is crucial information for the producers of the product or service. And it forms the base for some of the most important decisions taken by the manufacturer/ service provider. A product can be pri...
7 Pages(1750 words)Research Paper

Price Discrimination -Economics

...Differences Between Degrees of Price Discrimination to Increase Profits... Differences Between Degrees of Price Discrimination to Increase Profits... The fundamental theory of economics is based on the principle of demand and supply. From the very first lecture till the time one becomes a champion of economics, this assumption, law, rule of thumb, commandment or sacred Gospel of economics holds valid and does not waver even though other assumptions and models begin to evolve as more and more theories begin to surface (Samuelson, 2004). However, economics is a very cunning area of study in terms of the number of shortcuts and twists it offers to the people who are well aware of the complete picture of theories and practices of economics. Economists...
8 Pages(2000 words)Essay

The Different Degrees of Price Discrimination

...Differences Between Degrees of Price Discrimination to Increase Profits... Differences Between Degrees of Price Discrimination to Increase Profits... Economics: Define the different degrees of price discrimination. Provide one real world example for each. Price discrimination de s the charging of different prices from the buyer by the seller without in essence implying negative discrimination. There are three degrees of each time of price discrimination based on market segmentation and demand elasticity. First-degree price discrimination is the sale of identical goods are sold at different prices to each individual consumer. An example will be sale of new and used pianos where despite similar features some pianos might attract a higher tariff base...
3 Pages(750 words)Assignment

Explaining Cinema Tickets Price Differences

...Differences Between Degrees of Price Discrimination to Increase Profits... Differences Between Degrees of Price Discrimination to Increase Profits... Cinema Tickets’ Price Differences This paper explains why a cinema charges different admission ticket prices for each of three different types of customers and discusses the economic principle underlying this practice. There are several key assumptions underlying this analysis. First is that the cinema owner wants to maximize total revenues, which is the product of the number of tickets sold times the weighted average ticket price. Second is that buyers of cinema tickets generally behave according to the “law of demand” wherein the quantity of tickets demanded is inversely related to their price (M...
3 Pages(750 words)Essay

Price Discrimination Strategy

...Differences Between Degrees of Price Discrimination to Increase Profits... Differences Between Degrees of Price Discrimination to Increase Profits... on exploring economic analysis and modern problems and the economic way of thinking. Price Discrimination Strategy The strategy of price discrimination is the policy in which customers are grouped on the basis of some criteria and different prices are fixed for each group for the same product or service. This strategy is followed to increase the profit. There are two groups in the town one group is that of local people and other is that of visitors to town. By increasing the price for the visitors by 25% than that of local people revenues can be increase tremendously Price ceiling and Equilibrium...
2 Pages(500 words)Term Paper

Price Discrimination in Cinema Market

...Differences Between Degrees of Price Discrimination to Increase Profits... Differences Between Degrees of Price Discrimination to Increase Profits... Discrimination in Cinema Market Contents Introduction 3 Analysis 4 Price Discrimination in Cinema Market 4 Price Discrimination and Cost Structure 6 Market Conditions required for Price Discrimination 7 Ethical Perspective of Price Discrimination 8 Conclusion 10 Reference List 11 Introduction The industry of film and cinema making comprises several firms that are commercial as well as technological in nature. With rise in per person income level in the contemporary world, the disposable income proportion spent by individuals for comfort or entertainment purposes has also increased significantl...
6 Pages(1500 words)Research Paper

Price Discrimination

...Differences Between Degrees of Price Discrimination to Increase Profits... Differences Between Degrees of Price Discrimination to Increase Profits... Discrimination due: Introduction In various supermarkets shelve spaces that are close to the eye levels of customers are charged more expensively to vendors who wish to market their products in supermarkets. In comparison, those shelves near the floor or to top are charged much less. It also occurs when goods and services are provided to different customers at different prices. The price difference is unrelated to the cost of producing the goods and services. It is evident that price varies which shows evidence of price discrimination of products. Price discrimination is the way firms and chain of...
6 Pages(1500 words)Essay
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Let us find you another Research Paper on topic Differences Between Degrees of Price Discrimination to Increase Profits for FREE!

Contact Us