Question

In at least 200+ respond to the following (please include any references used) Would you consider price discrimination to be ethical or unethical? Why? Provide an example to support your position.

Answer 1

Price discrimination is the practice of charging different price from different customer for the same product. This is done majorly for the aim of capturing consumer surplus and increasing producer surplus. Price discrimination is mainly of three types: 1) First degree: This type of discrimination would mean that the seller is completely aware about the maximum price every consumer is willing to pay. And hence they charge different price from different customers. An example of this could be: Victoria’s Secret tested price discrimination through mail order campaign. It basically mailed the same type of catalogue to different segments of customer showing different prices. 2) Second degree: In this type of price discrimination, prices vary according to the quantity purchased. This kind of discrimination could be seen during bulk buying. An example of this could be: A clothing shop offering a shirt for $100 but offering four shirts for $250. 3) Third degree: This type of price discrimination includes selling the same product at different prices to different customer segment. An example of this could be: Charging different tickets prices from children, elders and young population.

In my opinion, price discrimination is unethical only when it is done on the basis of race, religion, nationality or gender, or if it is done by violating any anti-trust or price-fixing laws. For example: If a person is charged a higher price because he belongs to a higher income group, that is something which is considered to be an unethical price discrimination practice. However, price discrimination can be termed as ethical if the customer knows that he is being charged a different price or it’s ethical if it comes from the government that a different or lower price can be charged from people who belong to a lower income group and cannot afford the products at the market MRP.