What is price discrimination?(pls give me like real life examples)
In: Economics
Weddings are a real life example. There are people who feel socially or culturally obligated to have certain things as part of their wedding (having a white dress or a wedding cake, or they feel obligated to invite certain people to their wedding). They’re willing to pay more for a wedding cake than they would for a cake for another occasion. They’re not going to call off the wedding or not have a wedding cake because it’s too expensive. They might feel that they would lose social prestige by getting a sheet cake from a grocery store rather than a traditional wedding cake, or by inviting fewer wedding guests or having a different kind of venue. They’re not going to forgo having wedding pictures taken professionally because it’s expensive.
But you also have some customers who *will* do without those things if they’re too expensive. There are some couples who will get married at a courthouse rather than have a traditional wedding if the traditional wedding is too expensive. And you might also have potential customers who might consider using your services for occasions other than weddings, if the price is right. If you’re a baker, some people might buy birthday cakes at your bakery as well as wedding cakes, but only if your birthday cakes are not too expensive.
What you as a vendor need to do is to be able to tell the difference between these two groups of people, and discount your prices only for the people who won’t buy them if they’re too expensive. You can’t ask them straight out, because a lot of the people who aren’t sensitive to price still wouldn’t mind getting a bargain. If you know that most of your customers who are looking for wedding cakes are not particularly price sensitive, you can charge more for wedding cakes than for cakes for other occasions.
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