We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.

What Factors Affect the Degree of Price Discrimination?

Esther Ejim
By
Updated May 16, 2024
Our promise to you
SmartCapitalMind is dedicated to creating trustworthy, high-quality content that always prioritizes transparency, integrity, and inclusivity above all else. Our ensure that our content creation and review process includes rigorous fact-checking, evidence-based, and continual updates to ensure accuracy and reliability.

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

Editorial Standards

At SmartCapitalMind, we are committed to creating content that you can trust. Our editorial process is designed to ensure that every piece of content we publish is accurate, reliable, and informative.

Our team of experienced writers and editors follows a strict set of guidelines to ensure the highest quality content. We conduct thorough research, fact-check all information, and rely on credible sources to back up our claims. Our content is reviewed by subject-matter experts to ensure accuracy and clarity.

We believe in transparency and maintain editorial independence from our advertisers. Our team does not receive direct compensation from advertisers, allowing us to create unbiased content that prioritizes your interests.

Price discrimination is a term used to describe the process whereby certain manufacturers or sellers apply different prices for the same product or good to various categories of their consumers, based on their analysis of the market and their desire to use the process as some sort of business strategy. The factors that affect the degree of price discrimination a company will attach to its products and their customers is usually based on the outcome of the assessment of the particular consumer demographic. As such, the factors that affect the degree of price discrimination includes the ability of such customers to pay, the location, and an assessment of whether they will agree to pay. It may also be affected by the type of sale under consideration, such as when the goods are sold in bulk.

An example of a factor that might affect the degree of price discrimination is the location where the company is making the sales. For example, a clothing store might sell the same type of item for different prices, depending on where it is selling the item. As such, the clothing store might sell the different articles of clothing at a higher price when it is located in a an upscale neighborhood than when it is located in a less affluent area based on the assumption that the people who live in the upscale market can conveniently afford the mark-up of the prices. Apart from this, another factor that might influence the price increase in the area could be the higher overhead from the higher rent for shops in that area, making the increase a necessity if the store is to make any profit.

An additional factor that might affect the degree of price discrimination is the assessment of the customers in terms of whether they are willing to pay whatever marked-up price the seller attaches to the sale of the goods. For instance, a seller might be more willing to sell items at a higher price, even for comparable market segments, if the particular market bearing the brunt of the increased prices does not complain.

Another factor that affects the degree of price discrimination is the manner in which the goods were purchased. A retail store that purchases its goods in lots or in bulk will receive a more favorable price from the producer or manufacturer than the individual who only buys a few items at a time.

SmartCapitalMind is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Esther Ejim
By Esther Ejim
Esther Ejim, a visionary leader and humanitarian, uses her writing to promote positive change. As the founder and executive director of a charitable organization, she actively encourages the well-being of vulnerable populations through her compelling storytelling. Esther's writing draws from her diverse leadership roles, business experiences, and educational background, helping her to create impactful content.
Discussion Comments
By turquoise — On Nov 08, 2014

Other factors may actually be customer demand and quality of the product.

For example, there is a chain diner in our state that has quite a few diners across the state. But the prices and the quality vary from place to place and diner to diner. We live in a low income area where people don't want to pay more, so the ingredients they use at this diner is not as good. They do that to keep the cost low. But the diner that's an hour drive away and in a higher income area has higher prices because the ingredients are organic. That's what people in the area demand. So it's not just about what the business can get away with but also what the customers want and expect.

By bear78 — On Nov 07, 2014

@stoneMason-- No, I think they just look at the average income per household and determine the price that way. So areas where the average income is greater will have higher prices.

I agree with you that it's silly and unfair. But from the perspective of businesses, it's a great tactic and they make a lot of money that way. I actually don't think that people living in more expensive areas are happy to pay more, they don't have much of a choice.

I remember when I visited a friend in Ohio, I saw at the store that the cereal I eat is one third the price of what I pay on the west coast. It's the same exact cereal, it costs the same to make, but one box costs triple the price of the other box.

By stoneMason — On Nov 07, 2014

I'm a little confused about how prices are determined based on the location of the store. How does the company decide this exactly? Do they take a poll and ask people how much they're willing to pay? It all seems silly to me. The same product should cost the same everywhere.

Esther Ejim
Esther Ejim
Esther Ejim, a visionary leader and humanitarian, uses her writing to promote positive change. As the founder and...
Learn more
SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.

SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.