When different prices are charged from different buyers it is called?
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Price discrimination refers to the practice of a seller of selling the same good at different prices to different buyers. A seller makes price discrimination between different buyers when it is both possible and profitable for him to do so. Price discrimination is not a very common phenomenon. It is very difficult to charge different prices for the identical good from different customers. Frequently, the product is slightly differentiated to successfully practice price discrimination. In the words of Mrs. John Robinson “The act of selling the same article, produced under single control at different prices to different buyers is known as price discrimination”. Also Prof. Stigler defines Price discrimination as “the sales of technically similar products at prices which are not proportional to marginal cost” As per this definition, a seller is indulging in price discrimination when is charging different prices from different buyers for the different varieties of the same good if the differences in prices are not the same as or proportional to the differences in the cost of producing them. For Example, If the manufacturer of a mobile of a given variety sells at Rs. 10.000/- to one buyer and at Rs. 11,000/- to another buyer, (Specific Model) he is practicing price discrimination. Price discrimination is not possible under perfect competition, even if the two markets could be kept separate. Since market demand in each market is perfectly elastic, every seller would try to sell in that market in which could get the highest price. Competition would make the price equal in both the markets. However, price discrimination is possible and profitable only when markets are imperfect.
Price discrimination is of various types. Some of them are as follows:
Prof A. C. Pigou has distinguished between the three degrees of price discrimination.
Generally imposition of import tariffs and other restrictions on the inflow of foreign goods, create monopoly in the home market for the national industries, while they have to face competition in the foreign markets. The national industry, which enjoys monopoly of the home market, can fix a higher price for home consumers while disposing of the surplus produce in the competitive foreign markets at a lower price for the same good and seek to enjoy the advantages of the economies of scale. This type of price discrimination is called “Dumping”
Dumping takes place due to following reasons:-
Dumping is international price discrimination. Dumping occur when a producer sells a commodity in a foreign country at a price that is lower than the price which he charges in the domestic market. Price discrimination of the dumping type is possible because domestic and foreign markets are separated from each other because of large geographical distances, tariffs, quota and so on. We shall explain a simple case of dumping type of price discrimination when a producer is selling in the foreign market where he faces perfect competition, while in the domestic he has a monopoly. Accordingly, the demand curve for the product will be perfectly elastic for him in the foreign market in which he faces perfect competition, while the demand curve will be slopping downward in the domestic market in which he enjoys monopoly position. DIAGRAM
MEANING TYPES OF PRICE DISCRIMINATION DEGREES OF PRICE DISCRIMINATION CONDITIONS OF PRICE DISCRIMINATION DUMPING: Meaning , Objectives & Graphical Presentation PRICE DISCRIMINATION: Harmful or Beneficial CONCLUSION Reference What means charging different price from different buyers?Price discrimination. The act of selling the same product at different prices to different buyers is known as price discrimination.
What is it called when each customer is charged a different price?Price discrimination is a selling strategy that charges customers different prices for the same product or service based on what the seller thinks they can get the customer to agree to. In pure price discrimination, the seller charges each customer the maximum price they will pay.
What are the 3 types of price discrimination?There are three types of price discrimination that you can encounter: first-degree, second-degree, and third-degree. These degrees sometimes go by other names: personalized pricing, product versioning or menu pricing, and group pricing, respectively.
Can you charge different customers different prices?Price discriminations are generally lawful, particularly if they reflect the different costs of dealing with different buyers or are the result of a seller's attempts to meet a competitor's offering.
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