Price discrimination and its types

Price discrimination is a special campaign to sell products to a large group of consumers, based on their personal capabilities. Often it is used in conditions of imperfect competition and involves the sale of a specific product at different prices.

This concept was developed by the French economist Dupuis. In the 19th century it clearly divided the population into three main categories: the poor, rich and prosperous. Thus, he decided to demonstrate that people have different capabilities, so products at too high prices are not under the power of a poor category of citizens. But since every artisan and any enterprise strives to maximize profits, it is necessary to resort to a flexible pricing system.

In modern market relations, price discrimination allows organizations to significantly increase the number of customers and thereby improve the standard of living of the population. For example, a certain category of citizens can not purchase this product at a fixed price, but not against its purchase at a reduced cost. It turns out that the company covers the costs of production and receives a minimum percentage of profit, but at the same time qualitatively increases sales.

Of course, not all enterprises have the ability to easily regulate the price policy on the market. As a rule, the proposed method is acceptable for those firms that managed to take a strong position in the market and can influence the market situation. Price discrimination requires additional costs for studying the market, the consumer audience and the capabilities of the company itself. That is, before differentiating prices for goods, it is necessary to conduct a thorough market research and carefully plan everything.

Price discrimination and its types.

Scientists divide this concept into three main types:

- the first kind;

- the second;

- the third.

Price discrimination of the first kind is rather a theoretical kind, as in practice it is practically not applied. It is based on the desire of the seller, that is, he independently determines for what price to sell the goods to a particular user. There are several eastern markets where you can still meet such a free relationship. In general, consultants of expensive shops, private tutors act on this principle.

The most frequently used discrimination is the second kind. In this case, the price setting directly depends on the volume of purchases. A vivid example is the cost of goods when buying in bulk and retail, because the difference in these quantities is significant.

Price discrimination of the third kind is based on the differentiation of prices depending on the social category. Numerous shops and firms develop and produce various discount cards, conduct promotions and sales. For example, in cinemas a special day is provided, in which students can purchase a ticket with a substantial discount.

Experienced marketers conditionally differentiate buyers into potential and significant ones. This concept is especially acute in the production of expensive goods or services such as information technology. Of course, the acquisition of a large-scale technological system is quite costly and is designed for long-term use. However, progress does not stand still, various updates appear with enviable regularity. Large companies allow themselves to overstate the price of upgrading the system, and thereby reduce them for new customers.

So, price discrimination is a powerful tool that allows to increase the performance indicators of an enterprise. In addition, it is worth noting the improvement of the well-being of the population.