1. Why consumers do not pay the same price
Price Discrimination
Why consumers do not pay the same price

2. PRICE DISCRIMINATION
Price discrimination is the business practice of selling the same good at different prices to different customers
It is NOT considered a market failure
Overall, society benefits from this practice
For a Firm to price discriminate it must:
have some market power (some price control)
be able to identify & separate groups of consumers
be able to prevent resale between consumers

3. Examples of Price Discrimination
Coupons
Cell Phone “Calling Plans”
Shoppers who “buy in bulk”

4. End Result of Price Discrimination
It raises profits for producers
By charging different prices to customers
The industry will increase quantity produced
Example: more movie tickets are sold if seniors get discounts
Economist feel price discrimination is generally efficient!
Some consumers do pay more => but some also pay less as total quantity sold increases (i.e. the market gets bigger!)

5. “Would it bother you to hear how little I paid for this flight?”
5 minute American Airlines Video Clip (32min in DVD)

6. Examples of pricing practices
in our Economy?