Price Discrimination Policy as a Business Strategy

Price Discrimination
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Price Discrimination
According to Stole (2014), price discrimination policy is a business strategy that is used in offering different prices to the same services and goods to diverse customer groups for economic reasons which are not related to cost. The three broad categories of price discrimination policies are third, second degree and perfect price discrimination policies which occur for different economic reasons. They include profit maximization to increase revenues during peak seasons where customers are many, to relish economies of scale, increasing market share and tapping away from competitors, obtain equity via pricing, to off-load surplus stock and to acquire foreign markets. The conditions necessary for price discrimination to occur include the ability of the business firm operating in an imperfect competition that allows the firm to make price adjustments as it slopes downwards in the demand curve (Stole, 2014). There should be an ability of the firm to control the market through separation. For instance, in a train company, the firm shou...