Monday, July 24, 2006
Price Discrimination occurs when different prices are charged for the same product when there is no cost difference to the producer in supplying the product. This allows a firm to increase profits by taking advantage of exchange opportunities that would, at a single price, be foregone.
There are several types of price discrimination: charging a different price for each individual user, a different price depending on the quantity purchased, or a different price depending on who is purchasing the product. This last type is referred to as Third-Degree Price Discrimination (also known as Market Segmentation). It is a situation in which "each consumer faces a single price and can purchase as much as desired at that price, but the price differs among categories of consumers."
This concept explains why...
Microsoft Office at Best Buy: $399.99.
Microsoft Office at the SJSU bookstore: $80.
Posted by David at 3:05 PM