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Chapter 4 Price discrimination 4.1 Definition A prevalent marketing skill and economic phenomena.preferential price or quantity discount. eg. Sometimes people will think that if firms charge different price on different consumers for the same goods, it means price discrimination. But this understanding is incomplete. In much case, discrete price maybe only reflect traffic cost and sales cost fee. And in certain case, universal price means discrimination on the contrary (fixed fee in bus eg.).Price discrimination means one firm sales the identical goods to different consumers with different net price.(Philips,1983)Net price, subtract product difference from goods price. If price differentiation just reflects the cost difference of supplying to different consumers, we deem price discrimination doesn’t exist. Ratio test 《Harry potter》in painly packed edition vs. deluxe edition ,eg. At the same time, we can’t say providing different quality goods to different consumers means no discrimination. Reason of providing service in different quality (such as classed cabin in aircrafts and trains) partly is to get consumers surplus by segmenting consumers into different groups The concept of “identical” goods:BMW in USA is the same to in German? General equilibrium theorist may point out with some excuse,goods delivered in different time, different location and different state or different quality is different goods, so scope of pure price discrimination is very limited. Conditions of price discrimination 1、firms must has market power.We often confine it in monopoly or oligopoly market, only when firms can price higher than marginal cost, can they charge different price on different consumers.Locay and Rodriguez,1992:competitive firms is possible to practice price discrimination, if consumers purchase in group unit. 2、the ability of effective market segmentation. 3、ensure of no arbitrage. Market segmentationCan we find a right way to conduct market segmenta
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