chapter  9
14 Pages

Price discrimination

Price discrimination is the practice of a seller segmenting its customers into two or more groups and selling to those groups at distinct prices. In its purest form, the good or service being sold to the separate customer groups should be identical; in practice, the products sold are often slightly different. Price discrimination is a more general form of the type of profi t maximization pursued by a fi rm that uses storage. The ability to store a product allows sellers to divide their customers into customers now and customers later . The fi rm will not undertake storage without expecting to charge the later customers a higher price, so price discrimination is part of the plan in an optimal storage strategy.