Price Discrimination In Daily Life

Price Discrimination

Price Discrimination is action by which a single consumer may be charged different prices for different units of good bought or different consumers may be charged different prices for the same product or services.

Price Discrimination are of 3 types:

• First degree of price discrimination
• Second degree of price discrimination
• Third degree of price discrimination

First Degree of Price Discrimination

First degree of price discrimination is charging the price that the consumer is willing to pay.

Example: Let’s take an example of auction. Suppose a house is to be sold in an auction and offer a bid from 50 Lakhs. The bidders can increase price by 5 Lakhs only as been told. So in this process the highest bid reached to 1.5 Cr.And the seller sold the house at highest bid.So this is the example of First Degree of Price Discrimination.

Second Degree of Price Discrimination

Second degree of price discrimination is when the company charges a different price for different quantity consumed by offering discounts.

Example: We often see in malls where they give discounts based on the quantity consumed. For example, D-Mart they give discounts mostly on all the products. Suppose if I want to buy Lays Chips which costs around Rs. 20 each also there is discount on it if I buy combo pack (Buy 3 @ Rs. 50). I can choose to buy a combo pack or not, but if I buy only 1 or 2 chips it will cost Rs. 40 but if I buy combo pack it will cost only Rs. 50. Like they are offering less price of if I buy combo pack based on the quantity consumed by offering discounts. So this is an example of Second degree of price discrimination

Third Degree of Price Discrimination

Third degree of price discrimination is charging different price for the same product from different consumer in segments of market.

Example: There are many shopping malls that provide membership cards. Suppose let’s take an example of Shopper Stop, they provide different categories of membership card like Classic Moments, Silver Edge, Golden Glow. Each type of membership card provides different types of benefits like those who have Gold card they will get more benefits compare to those who carry Classic and Silver cards at the time of shopping. This is an example of Third degree of price discrimination.