Question

In one of its least favorite actions, Amazon.com was caught fiddling with its price tags. Avid DVD buyers, buying in quantity for resale, found that the online retailer was offering different customers different prices for the same DVD, and complained vociferously. Amazon was caught red-handed. Company officials admitted that the company was trying to see how much it could charge for an item before buyers balked. No matter what the reasoning behind it, Amazon.com was using price discrimination. What is your understanding of Price Discrimination?

Answer 1

Price discrimination is formed from two words price +Discrimination .Price means the quantity of payment or compensation given by one party to another in return for one unit of goods and services while Discrimination means the state of being different to different individuals for the same aspect so if combine both of them it means charging different prices from different individuals for the same product in other words the action of selling the same product at different prices to different buyers in order to maximize sales As given in our question Amazon.com was caught red handed because they were charging different prices from different customers for the same product and that is why complained was done in a loud or forceful ways.their are three degrees of price discrimination

First degree price discrimination-it occurs when a firm charges a different price for every unit consumed.firm tries to charge maximum price for each unit consumed maximizing the consumer surplus.this type of Discrimination is rare.

Second degree price discrimination means charging different prices for different quantities.Discount for those who have done Bulk purchases

Third degree price discrimination-it means charging a different to different customers group for example-cinema goers can be divided into children and adults and prices are charged accordingly.

A university of Pennsylvania study addressed online price discrimination revealed that majority of those surveyed believe d price customisation was illegal or strongly believe it ought to be.the truth is it usually legal .

Price discrimination is illegal if it is done on the basis of race,religion,nationality,gender,or it is in violation of antitrust or price fixing laws.