discrimination pricing

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.

advantages

• Firm will be able to increase revenue.
• Increased revenue can be used for Research and Development
• Some Consumers will benefit from lower fares

disadvantages

• Some Consumers will face higher prices
• Often those who benefit from lower prices may not be the poorest.
• There may be administration costs involved in separating the markets

EXAMPLE:Pharmaceutical industry: price discrimination is common in the pharmaceutical industry. Drug-makers charge more for drugs in wealthier countries. For example, drug prices in the United States are some of the highest in the world. Europeans, on average, pay only 56% of what Americans pay for the same prescription drugs.