By the term price distinction or price discrimination as part of the price strategy one understands the distinction between different customers in the economic science with the height of the prices of homogeneous goods. For example different prices for different versions, quantities, times, places, groups of customers or intended purposes (e.g. Studentenabo, pensioner discounts) can be demanded. A condition for this is that the market is separable. The goal of the price distinction consists of increasing by education of partial markets the profit. One speaks therefore of perfect price distinction (perfect price discrimination; also: Price distinction of first order), if the offerer succeeds in requiring of each customer exactly the price it the straight still ready is to be paid.

Example: Theatre tickets

Often theatre tickets are sold at pupils at lower prices than to working persons. This leads to a lower pro head conversion. Why is it worthwhile itself then nevertheless for the theatre to require different Pupils and working persons have different demand curves. With a constantly high price possibly a great many working person the concert to visit, the theatre would be however nevertheless insufficiently filled, since the pupils will rather spend their smaller income on more necessary things. In order to lure in addition, the pupils into the theatre, in order to occupy the remaining places and thus an additional, although lower to make pro head conversion it is worthwhile itself now to demand from the pupils a lower price.

A price distinction is present whenever goods of same kind cannot an enterprise be completely justified zuverschiedenen prices sold and the differences in prices not or through costing differences. Often the price distinction is connected closely with that product differentiation. One speaks then still so long of genuine price distinction, like the differences in prices of the different quality classes more largely be as the appropriate cost differences.

To an effective vertical price distinction the following conditions apply:

1. Market segmenting, i.e. allocation of the total market into homogeneous groups of demands.
   • imperfect market
2. Importability of the products

These conditions are fulfilled, if the markets can be differentiated regarding:

• the area (e.g. in Poland the Sprit is cheaper than in Germany, but by the spatial distance nobody will drive from North-Rhine/Westphalia to Poland to only refuel in order there)
• the time (in the main season or in the Nebensaison)
• after age (pupil, student, worker, pensioner)
• after income (first class ticket, second class ticket)
• personal price distinction (student prices in the cinema)
• Quantity-referred price distinction (a large packing is more favorable than a small)
• Purpose-referred price distinction (oil for the heating, Diesel for the passenger car/truck, same product)
• Product-related price distinction after product variation (an upper class passenger car with smaller motorizing is cheaper than a model with a V12-Motor)

Apart from the vertical price distinction there is the horizontal price distinction. A good example of it is the development of the price of computer processors in runs the time.

Related links

• Diagram of the price distinction

Articles in category "Price distinction"

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