Saturday, September 15, 2018

Basis of price descrimination

In my previous blog i talked about various kinds of price discrimination like first degree price discrimination, second degree price discrimination etc.. now i want to share various basis on which price discrimination is being done :

Place:
Markets may be divided on the basis of entry barriers.
For e.g, before the introduction of GST, different states used to tax the same product at different rates resulting in different prices of the same product in different states.

Different uses of the same commodity:
When a particular commodity or service is meant for different purposes, different rates may be charged depending upon the nature of consumption.
For e.g different rates may be charged for the consumption of electricity for household purpose, for industrial purpose etc.

Time:
Special concessions or rebates may be given during festival seasons or on important occasions.

Distance:
Auto or bus charges different rates depending upon the distance.

Nature of the product:
Price charged also depends upon the nature of the products.
E.g., railway department charges higher prices for carrying coal and less pricee for cotton.

Quantity of purchase:
When customers buy large quantities, discount will be allowed by the sellers. When small quantities are purchased, discount may not be offered.

Special classifiaction of consumers:
Transport authorities such as Railways and Roadways show concessions to students and daily travellers.
Airlines charges differently for economy class amd for executive class.

Peak and off-peak season:
Hotel and transport authorities charge different rates during peak season and off-peak seasons.

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