price discrimination

Setting two or more prices in different markets for the same product. For example, a manufacturer may sell its products at 10p per unit to a large supermarket chain which has considerable buying power, and 12p to other buyers.

It can also be argued that some of the utilities also price-discriminate. For example, British Telecom charges higher rates for peak phone calls than off-peak; the electricity boards offer different tariffs to different customers; British Rail offers reduced fares to customers who travel frequently (season tickets) or travel at off-peak times. Companies price discriminate because they can earn extra profit by charging higher prices to those customers prepared to pay more. Price discrimination is only possible, however, if the company can prevent customers currently buying at high prices from moving into the low-price market. For this reason, companies which price discriminate tend to be monopolists (see monopoly) or oligopolists (see oligopoly.

For this reason, companies which price discriminate tend to be monopolists (see monopoly) or oligopolists (see oligopoly.