Price discrimination is where a company, or provider of a service, sells the same good or service for a different cost to consumers based on different factors in order to produce more revenue. There are three degrees of price discrimination according to the economists at intelligenteconomist.com 1) The seller knows and charges the maximum price every buyer is willing to pay. 2) The seller charges different prices based on either the quality or quantity. 3) The seller charges differently depending on factors such as age, time of us, income level.
A good example of price discrimination, and one that I’ve come across recently when trying to book hotels for vacations, is hotels charging different prices based on location and time. For this example I’ll use the Sandestin Golf and Beach Resort in Destin Florida. I did a quick look up for two different date ranges. The first dates were in February, where one room would be $118 per night. I chose July for the second date range, and the results were $230 per night. This is a perfect example of price discrimination. The provider knows that consumers are willing to pay more because the summer months are more popular for travel, so they raise the price knowing people will pay it and that they won’t lose customers to a higher price.
Following the example I have used above, I personally believe that’s an unfair practice. While it is logical and a common practice, as a consumer, it causes me to pay more than I normally would because of the time of year. However, it’s a perfectly legal tactic that is justifiable because of the fact that there is a higher demand at certain times of the year, and as demand goes up, the price will go up. The alternative to this method is a flat rate, the middle price between both the off-season and on-season price.
what would be the best logical answer to this?