Price discrimination essay
Price discrimination is the practice of charging different prices from different categories of customers. There are debates regarding the ethical side of price discrimination. On one hand, purchases are voluntary acts and as long as customers are willing to purchase the goods in the presence of price discrimination, sellers will continue practicing price discrimination. On the other hand, Tiemstra (2006) emphasizes that price discrimination is unjust both from the utilitarian perspective (as it allows producers to raise profit margins higher compared to ordinary competition) and from the perspective of justice – equal customers should be treated equally and the seller’s rewards for selling equal products should be equal as well. In general, sellers tend to view price discrimination as fair and buyers perceive price discrimination as unfair, especially in the case when price discrimination is evident – for example, when online resources provide a field for entering a coupon code (Oliver & Shor, 2003).
One argument in support of price discrimination is libertarian argument: due to the voluntary nature of market bargains, price discrimination is acceptable and justified, and, moreover, it stimulates the development of products with high fixed costs or significant research costs which would not be possible in the absence of price discrimination (Tiemstra, 2006). It is not possible to state that price discrimination is universally fair or universally unfair; there are different situations and different industries and the ethical side of price discrimination should be considered separately in each situation according to the context.
An example of a situation when price discrimination is fair is the case when luxury goods with premium design are sold at different prices to different customers. For example, affluent customers want to purchase a high-quality TV and want to do it in minimal time. In this case, the best solution for them is to visit a retail shop and make the purchase quickly and effortlessly, although at a higher price.
An example of a situation when price discrimination is unfair is the example when a manufacturer of drugs producing a vitally important drug charges a price with excessively high markup because the customers will buy it in any case. However, the latter example also has exceptions – in those cases when the drug manufacturer had high investment costs, it would be fair to set higher prices to compensate for the costs and to continue research to improve the drug. In general, price discrimination has high chances of being unfair in the cases when higher prices are charged for goods with low price elasticity of demand (i.e. essential goods). However, in each particular case the fairness of price discrimination should be considered separately and there is no reason for outlawing price discrimination in general.
Do you like this essay?
Our writers can write a paper like this for you!
(No Ratings Yet)
Loading...