Discussions in economics

Running head: WEEK 5 DISCUSSION 1

WEEK 5 DISCUSSION 2

Camala Ward 

RE: Week 5 Discussion

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Hi Professor and Class,

The pricing strategy where you charge different prices from different customers is known as price discrimination. Price discrimination is a legal from of pricing carried out in business. Both the groups of customers, that is small and large will be satisfied, and if not, they can simply choose not to purchase the product or service. The idea behind charging less from large customers is to earn through scale of operations. The reason of charging more from small customers is to charge them more for work to earn more profit as volume of transactions is not very much and profitable in small work. This is the third degree of price discrimination where seller charge different price es of services and products from different groups of customers.

This plan of charging more price from small customers and less money from larger customers is a plan based on the concept of economies of scale. Economies of scale is a situation where a business earns profit by the scale or volume of the business done. Charging less money from big customers who bring in more work and revenue will give the company a chance to make more money through volume of business. Whereas, charging more from small customers will bring money and less work in.

Both the groups, that is small and big will be satisfied with the deal because a group of customers bringing in more work will be getting the services at a lower price as compared to the ones bringing in less volume of work. It would be like getting a discounted price for the more quantity of work. On the other hand, a group of customers who is small, will not be bothered very much by the price because it is volume of work is low.

Price discrimination is a legal form of pricing if done on the correct grounds. It becomes illegal if the discrimination is done based on sex, caste, religion, color, or gender. A company usually undertakes the price discrimination to capture the consumer surplus and earn to its maximum potential. There is always a customer in the market who is willing to pay more than the designated price and price discrimination comes in handy in situation likes these.

The various other examples of price discriminations are various coupons available, different discount available at the different times at the same place or some services giving out student discounts or adult discounts at some places. Making public transport free for a specific gender is also an example of price discrimination.

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Alice Teague 

RE: Week 5 Discussion

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Price Discrimination is a strategy utilized in sales, whereby the customers are charged various costs for a similar item or a help offered dependent on the merchants' view of what they can consent to pay. For the most part, it is predominant in the conditions where a firm can make more benefits by victimizing the costs. 

To start with, the organization can make critical benefits from online administrations to bigger clients since they can buy in mass, a trademark that little customers can't appreciate (Bonatti and Cisternas, 2020). Moreover, offering to more significant individuals at a lower cost permits an organization to make a benefit, accordingly, increasing more income. Therefore, the two arrangements of clients will be at the cost separation thought (Bonatti and Cisternas, 2020). This kind of segregation is third-degree since it involves charging various costs from unmistakable customer gatherings. 

By price discriminating both enormous and little customers, an organization will expand its income as in individuals will have the option to purchase in mass and furthermore make retail deals. As per DeGraba (1990), lower costs to more prominent clients will additionally improve the base and lift the association's pay. The two arrangements of buyers will be fulfilled as enormous customers can appreciate deals in mass, while the little ones will be guaranteed of the estimation of their buys since great items and administrations will be ensured. 

This type of evaluating is lawful since it empowers the clients to make the most elevated income conceivable from the accessible arrangement of customers. Also, this separation isn't exposed to race, religion, sexual orientation, ethnicity, or infringement of any value fixing laws (Bonatti and Cisternas, 2020). The client is essentially charged a value that is near their eagerness to pay; consequently, value segregation is moral. 

References  Bonatti, A., and Cisternas, G. (2020). Purchaser scores and value separation. The Review of Economic Studies, 87(2), 750-791.  DeGraba, P. (1990). Information market value separation and the decision of innovation. The American Economic Review, 80(5), 1246-1253.

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