History of the term "price discrimination"

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The term "price discrimination" (PD) was introduced into circulation by the French economist Jules Dupuy in the 19th century. He presented his own concept, describing the main features of the phenomenon. Subsequently, his students Alfred Marshall and Arthur Pigou built a whole theory of price discrimination.

Dupuis focused on the fact that some companies sell the same product at different prices, divided buyers into rich, well-off and poor, pointing out the differences between them in the degree of elasticity of demand. The scientist also demonstrated that the main goal of price discrimination is to increase the profits of companies.

Types of demand factors

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John Lardner delved into this topic in his work "The Economy of Railways: A Treatise on the New Mode of Transport, Its Management, Prospects, and Relations Commercial, Financial, and Social." Although there is an opinion that he knew nothing about Dupuy's research and worked on the problem, essentially, independently. In Lardner's work, the elasticity of consumer demand is analyzed, and price discrimination is considered in the context of measures to increase profits .

Arthur Pigou was the author of the modern definition of this term. In his study "The Economic Theory of Welfare" he divided discrimination into three types, highlighting several conditions under which it becomes possible: a specific product cannot be replaced by any other, and the cost of one unit of a product should not depend on the price and demand for another.

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The purpose of price discrimination
Price discrimination in the market is a policy in which the same goods are sold to different groups of buyers at different prices at the same time. At the same time, the cost of production and logistics is the same in all cases. The price is set for the purpose of increasing the attractiveness of the goods to a certain segment of the consumer.

Traditionally, the concept of “discrimination” is perceived in a negative light – as an infringement of someone’s rights, but in economics it has a completely different connotation and is belize mobile phone numbers database understood as the distinction between different groups of buyers and the creation of more comfortable conditions for them.

The seller uses this tool to sell more units of goods at the maximum price permissible for a specific category of consumers. The types of such discrimination depend on the specifics of price formation.

In 1996, the famous Victoria's Secret company, which produces and sells women's underwear, sent out product catalogs that listed different prices for different categories of consumers. One of the company's clients, outraged by such a pricing policy, filed a lawsuit, accusing it of fraud. However, the lawsuit was lost, since the "flexible pricing strategy" used by the entrepreneurs was recognized as legal.

In the area of ​​exclusive goods trade, an ill-conceived CD can negatively affect relationships with customers and lead to a decrease in sales. It is possible to use this tool in this case, but it is necessary to act with precision, studying and analyzing the opinions and behavior of regular customers using psychological methods. At the same time, it is extremely important to prevent leakage of information about the existence of different prices for consumer groups.

Sales of mass-market goods using CD can be carried out more freely. In this case, it will be price discrimination of the second degree. Its essence is that a person has the opportunity to buy more goods at a low cost: for example, three things for the price of two. This strategy is used by many brands from different areas: H&M, O'STIN, Burger King, KFC and others.

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