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Published on: 01/2/17 Modified on: May 26th, 2018 Author: Fazal Rehman Shamil

Price Discrimination in E-Commerce

What is price discrimination on internet?

Price discrimination is a mechanism to sale the totally same and identical products on the internet with different prices on different community of peoples.

Example:

Product A is the one product that is sell in Pakistan in Rs.100, and the same product is sell in USA in 400 Dollars.

  • What are different types of price discrimination?
    • 1st Degree Price Discrimination
    • 2nd Degree Price Discrimination
    • 3rd Degree Price Discrimination

What is 1st Degree Price Discrimination?

In 1st degree price discrimination, seller charge the maximum price from the customer by observing on the internet that how much maximum amount a customer can pay.

  • Give examples of 1st degree price discrimination?

    • Customer 1 history record tells us that he/she mostly willing to buy expansive mobile phones, so seller offer more rate to such kind of customer and the customer 2 whose history record tells us that he/she mostly willing to buy cheapest mobile phone, then seller offer cheapest rate to such customer. Even the mobile phone is with same specification and same qualities, but the seller charge more amount from customer 1 and less amount from customer 2.

What is 2nd Degree Price Discrimination?

In 2nd degree price discrimination, seller offers different prices of the same product by keeping in view the sale of the product.

  • Give examples of 2nd degree price discrimination?

    • E-books of “religious” category are sold in too much quantity, so a rate with concession can be applied.
    • E-books of “Fun And Jokes” category are sold in a little quantity, so a rate with high amount  can be  applied to the customer.

What is 3rd Degree Price Discrimination?

In 3rd degree price discrimination, seller offer different prices for the same product to different groups of peoples.

  • Give examples of 3rd degree price discrimination?

    • Different rates of the same product with same product specification;
      • to people of different countries.
      •  to different users of different operating systems.
      • to different users of different operating systems.