Question

Discuss why price discrimination is more widely used in service industries than in product industries.

Answer 1

Price discrimination

• when customers are charged differently for the same product or service in microeconomic concept it is called price discrinination, most commonly the seller place the customers in groups and according charges them differently for the same service or the same product
• it is a profit maximising strategy in microeconomics
• charging of differnt prices by monopolists for the same product. in other words when product is sold to different buyers at different prices.
• for example booking of air travel tickets of a particular airlines. the customer that charges prior to the schedule travel will be charged less comparitive to the consumer that books the tickets on time for travel, he may even reduce the cost of the ticket at the end moment depending upon the demand for the ticket or the travel. in this kind of situation the service provided is the same to all but the price varies as per the demand and as per the time of booking the tickets. its depend supon elasticities of demand.
• there are various forms of price discriminations like the personal price discriminations, geographical price discriminations,pricing discriminations as per the use. with various degrees of price discriminations.
• with various degrees of price discriminations in the service industry like the first degree price discrimination in terms where the seller sells the same product or service to the consumer at different prices. if a sevice was to be provided to a reputed company the prices charged for the service would surely vary to the prices charged to the newly formed company.
• the second degree price discrimination in the service where differnt prices are charged a the amount of quanity of the service provided. the more the service provided the lesser in comparison tot the only one service tat was to be met
• the third degree price discrimination where for the same servic eprovided the seller would charge differnetly. for a movie the senior citizen would be charged considerably less in comparison to the rest of the customers