• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Price Discrimination (using the example of a coach operator)

Extracts from this document...

Introduction

Price Discrimination (using the example of a coach operator) Price discrimination is practiced by monopolies and involves the charging of different prices for the same product, in different sub-markets. Therefore, it is assumed that the market structure for a coach operator is monopolist. A coach operator would undertake price discrimination in the UK because it allows them to increase their profits, as they are able to capture excess consumer surplus and convert it into extra revenue for the firm. A coach operator will only be able to practice successful price discrimination if the firm is able to identify clear differentiated sub-markets, each with a varied Price Elasticity of Demand. Also, the coach operator needs to ensure that the benefits obtained from price discrimination in terms of revenue gained, outweigh the costs of undertaking price discrimination. The coach operator will only be able to undertake mostly 3rd degree price discrimination. The firm can price discriminate by charging lower prices for consumers using the coach services during off-peak hours, and consumers using the coach services during peak hours. ...read more.

Middle

and then charges price (A) for quantity (DC), the consumers lose out on the consumer surplus (BXAY) which is captured by the firm in the form of extra revenue. However, price discrimination can also be beneficial for the consumers. In cases where it leads to a greater expansion of sales and output as well as a significant fall in the average costs of production, even those consumers in a higher priced market will be obtaining goods at a lower price than they would have been charged in single market. (eg: if the coach operator is able to achieve economies of scale, he will be able to provide better quality cost-efficient coach services for even the higher priced consumers). Price discrimination also benefits consumers when it enables a monopolist to earn a profit from some non-economic activity that might not have been otherwise possible. (eg: through price discrimination, the coach operator will be able to provide serves on less known unpopular routes, which would otherwise be loss making, and therefore not provided at all). ...read more.

Conclusion

An increase in tax revenue is generally seen as advantageous because it may lead to a fall in the PSNCR (public sector net cash requirement), but this affect is unlikely to be seen in this situation. Finally, society itself does not necessarily benefit from price discrimination. Sometimes, the increased profits achieved by the coach operator may benefit the economy as a whole, if they are reinvested in research and development and lead to the production of new, innovative, better quality products, or even improvements in productive efficiency. Some non-economic services (like coach travel on less-used routes) are also made possible through price discrimination and would not exist in single markets. However, the practice mostly only serves to exploit consumers and in general terms, favours the firm employing the practice rather than the consumers receiving the services. Also, even through price discrimination, the firm still remains allocatively and productively inefficient, (as Price is not equal to Marginal Cost, and the coach operator does not produce its commodity at the lowest point of the AC curve). This results in low overall economic efficiency in the county. ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our AS and A Level Marketing & Research section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related AS and A Level Marketing & Research essays

  1. Marketing Research

    Structured non disguised questionnaire 2) Structured disguised questionnaire 3) Non structured non disguised questionnaire 4) Non structured disguised questionnaire 1) Structured non disguised questionnaire * Questions are listed in a pre-arranged order * Respondents are told about the purpose of collecting information 2) Structured- disguised questionnaire * Questions are listed in a pre-arranged order * Respondents are not told about the purpose of conducting survey 3)

  2. Business studies, product development

    I would have to put the adverts on in the later afternoon from like 5-11 because otherwise students will be at school or they will be working so they wont be able to see the advert if it is on before.

  1. Price Elasticity of Demand.

    A price change can cause total expenditures (total spending) on a good to increase or decrease. In almost all cases, a price change will cause the amount of total revenue received from the sale of a good to increase or decrease in price.

  2. Applied Business Studies

    are acting magazine handed out, I will need to speak to the editors and buy a section of the magazine to advertise my business. These aims are very important to me, as if I don't reach those aims, then my business will not go anywhere.

  1. Managing Markets

    PESTEL stands for Political, Economical, Sociological, Technological, Environmental, and Legal factors that would influence the industry or the product in a country or region of its operations. Now we will assess each of these factors in detail and how they influenced the company and the products it offers in the past twelve months.

  2. GLOBAL STEEL INDUSTRY DEVELOPMENT

    Apparent Consumption of Steel Apparent consumption of steel is arrived at by subtracting export of steel from the total of domestic production and adding the import of steel in the country. Change in stock is also adjusted in arriving at the consumption figures.

  1. SunCity - developing marketing strategy for problem

    Market research- market research is the research a company will carry out to their customers and potential customers, they will find out what they want, and what they think is important, this will help Sun City to prioritise their tasks and alter their own objectives and goals.

  2. Investigating Marketing

    If you go to a phone shop today, there are many phones you can choose from, because many phone manufacturers see the different needs of customers. A same phone brand will have many different phones costing from a few hundred to few thousand dollars, besides income and gender group, they even make phones for the older and younger age groups.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work