Good and Bad Price Discrimination

Note to new readers: Do check out my other articles on versioning and price discrimination. It would help me greatly if readers coming from Rutgers or New Jersey let me know how they found this article.

Discrimination has a bad connotation to it, it is safe to say that any kind of discrimination is not only disapproved by most democratic societies and but also is unethical.

Does that spill over to price discrimination? If general discrimination is treating different people differently based on demographic or psychographic characteristics, price discrimination is charging different prices to different people based on value they get and their willingness to pay.

However it is not possible to find what everyone’s true WTP is and consumers revolt marketers take the short cut – treating the demographic and psychographic variables as a stand in for value difference and implement third degree price discrimination.

The alternative is second degree price discrimination – offering multiple versions at different price points so that consumers self-select themselves to the right version.

I am starting to collect and list pairs of bad and good price discrimination. Do add yours in comments and I will add here.

Bad: A supermarket charging higher prices in low income neighborhoods, where there are fewer alternatives.

Good: Merchants in touristy places charging exorbitant prices.

Bad: Charging different prices for women and men for haircut.

Good: Charging different prices based on length of hair and on stylist level.

Bad: A restaurant charging people different prices because of their ethnicity.

Good: Offering many different menu items that appeal to different pallets at different price points.

Bad: Charging different prices for checkin at airports based on passenger’s skill set.

Good: Charging additional price for agent assistance for checkin and giving automated checkin for free.

3 thoughts on “Good and Bad Price Discrimination

  1. Price discrimination is harmful to the consumers to some extent as one of the flaws to ward it is that it does not promote competition rather it promotes some companies can do is sell there product at a cheaper price and then weed out all the other competition, and end up take the entire market, but also price discrimination is fine if you are discriminating for instance for hair length per individual at a hair store.

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