Question

discuss whether price discrimination is efficient. And then discuss another example of price discrimination and whether you think it is appropriate.

Answer 1

Notable points which argue price discrimination is efficient:

• Price discrimination, if correctly practiced, may have several beneficial progressive effects to society as a whole.
• Poorer families have lower incomes and for this they cannot afford to pay the normal market prices. Price discrimination allows them to pay cheaper prices and avail the goods and services. It helps them improve their standard of living and consume with greater diversification.
• Price discrimination also helps the producers to realize the greater part of their installed production capacity. Price discrimination actually causes rise in demand in market and if the producers have unutilized production capacity, they can now utilize it and bring more efficiency in their operations.

For example, students are given discounts in rail and metro train travels. Senior citizens who are above 65, also get significant discounts in tickets on many routes. This is two way beneficial, for: (i) it extends greater support to the needy and poorer section of society; and (ii) the unclaimed passenger seats in railways get booked and fetch better revenue than none. We also see price discrimination in case of schooling fees and college fees. We also see that in healthcare, where the state run hospitals provide highly affordable care compared to the market equilibrium price of healthcare. Not only this, we see the price discrimination doing great in case of 'public distribution system' of food to poor families. They can avail various staples at lower prices than in market.

All said and done, barring certain cases of cunning practices, over all, price-discrimination has done good to the society and producers both. It is definitely appropriate.