Price Discrimination Social Sciences Essay Research (Essay Sample)

Name
Professor
Course
Date
Price Discrimination
Businesses often employ different strategies to gain profit and stay ahead of their competitors. Price discrimination is a strategy used by big manufacturers to gain from differences in elasticity for different consumers. It occurs when the same or identical products are offered to various consumers at different prices by a single seller depending on what the seller believes they can get the consumer to pay (Varian, 597). Price discrimination happens on the premise that consumers from certain groups can spend more or less based on how the product or service in question is valued by the consumer. The success of a discrimination strategy is largely depended on the elasticity of demand for the sub-markets. Customers are likely to pay higher prices for an inelastic submarket, and lower prices for an elastic submarket.
Certain conditions are necessary for price discrimination to be successfully implemented. The conditions include the ability to identify different market segments by the seller or firm (Varian, 604). The seller must identify the consumer and categorize them before implementing a discrimination strategy. For instance, consumers can be classified as domestic or industrial users. Secondly, the seller must identify the consumers' elasticity. Consumers in an inelastic segment are likely to accept higher prices while consumer for an elastic market will be willing to pay for low prices.