Why is Price Discrimination Harmful?
Negative Aspects of Price Discrimination
Written by J. Mance Gordon
Updated at April 17th, 2024
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Why is Price Discrimination Harmful?
Price discrimination is the practice of selling the exact same product to competing wholesalers or retailers at different prices. This is generally negative (and often illegal) because it creates unfair competition. Basically, when you distribute your product at a lower price to one retailer than another, that retailer will have a market advantage. The retailer paying the higher price will make less profit or have to raise its price (which harms consumers).
It's important to note that price discrimination does not apply if the cost of the product changes. For example, if the cost of raw material rises, then it is acceptable to charge a higher priced for the product at that time. During the COVID-19 pandemic, the cost of raw material and transportation rose dramatically. As such, the price of products also rose.
Related Topics
- What is the Right Price for a Product?
- Competition-Driven Pricing
- Profit-Oriented Pricing Strategy
- Sales-Oriented Pricing Strategy
- Status Quo Pricing Strategy
- Value-Based Pricing Strategy
- Penetration Pricing Strategy
- Manufacturers Suggested Retail Price (MSRP) Definition
- Markdown
- Price Skimming
- Why Give Discounts?
- Trade Allowances
- Charging for Product Transportation
- Legal Issues with Pricing
- What is Product Dumping?
- What is Price Fixing?
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- What is Price Discrimination?
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