Price discrimination

Ø 1) Read the heading and the word combinations from the text and say what the article is about: to discourage customers from, to keep different price groups separate, to make comparisons difficult, to restrict pricing information, a form/method of price discrimination.

Ø 2) Look through the text and say in what spheres of life discrimination is common.

Price discrimination exists when sales of identical goods or services are transacted at different prices from a single vendor. Theoretically, price discrimination is a feature only of monopoly markets, but in practice it occurs with oligopolies such as the airlines. In addition to a monopoly market, price discrimination requires some means to discourage discount customers from becoming resellers and, by extension, competitors. This usually entails either keeping the different price groups separate, making price comparisons difficult, or restricting pricing information. The boundary set up by the marketer to keep segments separate are referred to as a rate fence.

Examples of price discrimination.

Travel classes in aircraft and trains are often said to be methods of price discrimination. This is not technically true since first class and economy class are different services. However, to the extent that both classes transport passengers from one point to another, subjecting them to the same time delays and so on, travel classes can be considered as price discrimination.

With U.S. airlines following deregulation in the 1980s, airfares are notoriously irregular and only loosely correlate to the costs of the service provided. To avoid getting a raw deal, strategic consumption is necessary on the part of an individual purchasing airline tickets. An individual, purchasing tickets for dates far in advance, or alternatively too close, will suffer inflated fares. Additionally, airfares are higher during the holidays and high travel seasons than during the rest of the year, though the costs of providing the services (responsive primarily to prices of jet fuel) do not change.

Some have claimed that U.S. airlines charge high fares because they are no longer subject to control since the Reagan administration deregulated the industry in the 1980s.

Others claim that free market policies have forced airlines to become more competitive and to lower prices. Unstable prices are certainly attributable in part to the recession that began in the late 1990s and increased terrorist threats since September 11, 2001.

Many U.S. nightclubs feature “ ladies’ nights” at which women are offered discount or free drinks, or they are absolved from payment of cover charges. This differs from conventional price discrimination in that the primary motive is not, usually, to increase revenue at the expense of consumer surplus. Rather, establishments benefit by maintaining an equitable gender balance; if the clientele of an establishment is primarily male it will lose popularity with both men and women, and therefore it is better for the establishment to lower its prices for women if they show less demand.

Financial aid as offered by U.S. colleges and universities is a form of price discrimination that is widely accepted, and completely legal.

These institutions often price discriminate by setting their prices well outside the reach of most families, sometimes as high as $170,000 for four years of education. Middle- and lower-income students are often afforded discounts and loans to lower these costs to the institution’s estimation of the family’s willingness to pay.

Since financial aid is awarded according to parental income, students whose parents are wealthy but refuse to pay for college are often unable to afford a college education at all. Little objection is given to this version of price discrimination because, allegedly, the per annum costs of educating one student exceed even the tuition rate one pays without financial aid.

Ø 3) Give your own examples of price discrimination.

Ø 4) (Перевод текста “THERE ARE PENSIONS, AND THERE ARE EAGLE STAR PENSIONS”)

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