CIA-price_discrimination

[|Price Discrimination and Internet]
by tejvan

//Has internet made price discrimination more difficult or easier?// Price discrimination is charging different prices to different groups of consumers for the same good. For example: Buying a ticket in advance means that you often get a cheaper price because your demand is more elastic. Buying a train ticket last minute is often more expensive because demand becomes inelastic. If you buy airline tickets from Ryanair, you will notice how the price can vary. Ryanair use computer models to maximise revenue from ticket prices. If demand for a flight is low, tickets will remain cheap. If demand is high, they will put up prices to get maximum revenue from remaining seats.

Diagram for Price Discrimination


Profit is maximised where MR=MC. This leads to a higher price in market b where demand is more inelastic. However, the internet has also made it easier to check prices and prevent firms exploiting consumers In the past UK Car dealers could sell car makes at a higher price in the UK. However, the internet means it is easier to see that the same brands are cheaper in Europe, so people go there and buy, reducing the geographical price discrimination. Internet can even be used to order right hand drive.