write the differences between price discrimination and price differentiation.
Dear Student,
Price discrimination :
1) It is a method of pricing adopted by the seller , where he sells the same commodity at different prices to different buyers.
2) The seller adopts this method of pricing, only when he has control over the market. Hence, price discrimination is found mostly in the monopoly market.
3) The seller divides the market into 2 sub-markets based on the elasticity of demand. He charges a higher price in the market with inelastic demand and charges less price in the market where demand is more responsive to change in the price.
4) There are 3 degrees of price discrimination :
1st degree : The maximum price is charged for each unit consumed.
2nd degree : Discounts are given on bulk purchases.
3rd degree : Different price is charged to different consumer groups.
5) Example : Electricity rates are priced low for business use and high rates are fixed for domestic use.
Price differentiation :
1) Price differentiation is equivalent to the term price differentiation. It is s a pricing strategy that charges different segments of customers.
2) In this method of pricing, the seller may not have entire control over the market. This method of pricing is adopted by sellers mainly to maximise profit.
3) This type of pricing can be seen in our day to day lives. Eg : A Pizza company prices the pizza low during weekdays, while the same pizza is charged at a higher price on a weekend.
4) The two types of price differentials are :
(i) Clock time differentials - prices for the same commodity or service vary at different times in a day.
(ii) Calendar time differentials - prices for the same commodity or service vary at different seasons.
5) Example : Resort packages are highly priced during the holiday season, whereas the same resort announces discounts and low prices during off-season.
Regards,
Price discrimination :
1) It is a method of pricing adopted by the seller , where he sells the same commodity at different prices to different buyers.
2) The seller adopts this method of pricing, only when he has control over the market. Hence, price discrimination is found mostly in the monopoly market.
3) The seller divides the market into 2 sub-markets based on the elasticity of demand. He charges a higher price in the market with inelastic demand and charges less price in the market where demand is more responsive to change in the price.
4) There are 3 degrees of price discrimination :
1st degree : The maximum price is charged for each unit consumed.
2nd degree : Discounts are given on bulk purchases.
3rd degree : Different price is charged to different consumer groups.
5) Example : Electricity rates are priced low for business use and high rates are fixed for domestic use.
Price differentiation :
1) Price differentiation is equivalent to the term price differentiation. It is s a pricing strategy that charges different segments of customers.
2) In this method of pricing, the seller may not have entire control over the market. This method of pricing is adopted by sellers mainly to maximise profit.
3) This type of pricing can be seen in our day to day lives. Eg : A Pizza company prices the pizza low during weekdays, while the same pizza is charged at a higher price on a weekend.
4) The two types of price differentials are :
(i) Clock time differentials - prices for the same commodity or service vary at different times in a day.
(ii) Calendar time differentials - prices for the same commodity or service vary at different seasons.
5) Example : Resort packages are highly priced during the holiday season, whereas the same resort announces discounts and low prices during off-season.
Regards,