U.S. Economy

Be Careful of Price Discrimination in the Retail World

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In theory, charging everyone the same price is inefficient and not profitable. If you price your item so you make only a couple of pennies on each one, you'll attract every possible customer you can, but you won't maximize your profit. If you price the item so you make ten cents on each one, you'll make more money but you'll also price some customers out of the market. That can be bad for you and bad for the customers who don't get those items. Instead, every customer is charged the precise amount they're willing to pay — that is, the amount that exactly matches the value they put on your item — efficiency is maximized. Every possible customer gets the item, no customer pays more than they think the item is worth, and you make the largest possible profit, in theory.

Read it at Mother Jones


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