Price Discrimination
Price discrimination raises revenue by separating buyers according to willingness to pay. The seller preserves a high price for customers who barely feel it while offering a lower route to customers who would otherwise walk away.
The same product can cost ₹499 and ₹399 at the same time—not because its cost changed, but because one buyer will tolerate ₹499 while another will refuse to buy above ₹399.
E1Turn willingness to pay into two checkout paths
A single price forces a seller to choose between margin and reach: charge ₹499 and lose price-sensitive buyers, or charge ₹399 and surrender ₹100 from everyone who would have paid more. Price discrimination escapes that choice by creating separate paths. Small hurdles such as discount codes or restricted offers make buyers reveal their sensitivity: those motivated enough to clear the hurdle receive the lower price, while the indifferent pay the regular one. This operationalizes Customer Segmentation without openly labeling customers as rich or poor.
E1Where it shows up
₹499 for convenience, ₹399 for persistence
The higher price captures buyers who care more about completing the purchase than searching for a concession. The lower price rescues a sale from buyers whose willingness to pay stops at ₹399. Both transactions can remain profitable even though the product is identical.
E1The separation must hold
The mechanism weakens if every buyer can obtain the lower price effortlessly: the discount then stops sorting customers and simply becomes the real price. It also fails when the reduced price falls below the seller’s cost, or when visible unequal treatment creates enough resentment to damage demand.
E1Search for the sorting hurdle
Before paying the displayed price, check whether the seller has created a second route for price-sensitive buyers—a code, bank-specific offer, or comparable eligibility hurdle. Set a strict time limit for checking it, then compare the actual saving with the effort and constraints required to claim it.
Episodes that teach this
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The Dirty Tricks Behind Amazon & Flipkart Sales - Future IQ
· explained at 10:14
61,201 views
"the company is cleverly trying to do is sell the same product at two different prices... the regular price is for rich people who don't care... whereas there is another section who will not buy at 499 but they are willing to buy at 399."