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Price Discrimination: The Path to Additional Profi

Price Discrimination: The Path to Additional Profits? What is price discrimination? Here is some help with the basics. Theidea that transactions in a marketplace work like an invisible hand isto some extent the idea that when a person chooses to buy an item at agiven price they are happy with the deal. There is no coercion. If theperson really does not like the deal they simply walk away. Giventhat background. Your business partner is strongly opposed to yourproposal to charge your largest customers lower prices for yourweb-based services than you will charge your smaller customers. She isarguing it is unethical, unfair and possibly illegal. What degree isthis type of price discrimination and how will the plan increase revenue? MAKE A CASE that bothcustomers will be satisfied with the deal and that this is a perfectlylegal form of pricing in a business to customer relationship. PLEASE DO NOT RELY ON WIKIPEDIA, INVESTOPEDIA OR ANY OTHER PEDIA AS A REFERENCE AT ANYTIME IN THIS COURSE.Example from one of my peers:Pricediscrimination is when a firm sells goods or services to separatebuyers for different prices. This could be for reasons that are notnecessarily associated with cost. It creates greater revenue for thecompany. With the background given this is an example of third degreeprice discrimination. Larger customers will appreciate the deal they arereceiving and purchase more at the lower price and will continue doingbusiness with the company. Smaller customers will continue to purchaseas normal, being none the wiser, that you are charging the largercustomers less. This is a way to maximize profits for the company. Bymaximizing profits the web-based company can put more back into thecompany while also creating and innovating more product and growth. Youcan also look at this from a second degree discrimination mindset ifyou look at it in a quantity scenario. Let’s say that the web-basedcompany sells subscriptions to its site for certain online product uses,ranging from 1 day, 1 month, 6 months or 1 year. A larger customer ismore likely to purchase a subscription or membership at a lesser pricefor 6 months or a year. They are saving money which keeps them a happycustomer. Smaller customers may only purchase 1 day or 1 month for ahigher price as they may not need the services for a full year or 6months. Everyone gets what they need while the web-based companycontinues to build profit.

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