Online Businesses & Price Discrimination

Whether it is getting a new haircut or buying car insurance, price discrimination is certainly something everyone- whether young or old, male or female- has experienced. I for one have witnessed price discrimination in various forms and outlets. Though it never seemed comprehensible in the past, understanding the mechanics of price discrimination has changed my mind about why some firms charge various prices for the same services or good. Growing up I noticed the various differences in prices for me and my parents. For example, one of the most blatant use of price discrimination when I was younger was entry into theme parks. Children’s prices were typically 30-40% less than what the price was for adults. As a preteen, walking down the aisles of the cosmetics section was very different than walking down the aisles of the men’s care section. Women’s shaving cream was almost always double the price of men’s shaving cream, despite doing the same job. Another example of price discrimination I have noticed in the recent years, especially now as a driver, is the varied disparity in gas prices. I have noticed that wealthier neighborhoods usually have more expensive gas because people are willing to pay that price. Despite these tangible examples of price discrimination being so evident in our lives, it continues to play a predominant role in our market.

 

With online shopping becoming an increasingly popular market among consumers today, shopping websites are constantly looking for ways to price discriminate customers. A possible scheme that might be effective for online companies to price discriminate is observing internet histories to analyze shopping patterns. For example, if someone is looking to buy a waffle maker they will naturally search “buy waffle maker” in a search engine. A website selling a waffle maker can pick up on the consumer’s necessity for one and sell the waffle maker at a higher price to them. Similarly, a customer looking to purchase a waffle maker can also be interested in purchasing a complementary appliance such as a coffee maker and the company can offer that item on sale in combination to a waffle maker. Therefore, the company can exploit the price discrimination to make more profit.

 

This is just one example of price discrimination that can work for various companies. As consumers evolve their shopping habits, price discrimination also must conform to market changes.

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