Courses : Intermediate Microeconomics Lecturer : Frischa Adellia Semester : 4th Semester, 2022/2023 Sesion Theory of Pricing Based on Discrimination The theory of pricing based on discrimination is an economic theory that describes the strategy of a monopolist to set different prices on the same product for different consumers, with the aim of maximizing the company's profits. Some of the characteristics of the theory of pricing based on discrimination include: 1. The monopolist can set different prices for different groups of consumers. 2. Price discrimination can be done if the company is able to distinguish between different consumer groups, and can limit the ability of consumers to buy goods in alternative markets. 3. There are three types of price discrimination, namely price discrimination against different consumer groups, price discrimination over the time of purchase, and price discrimination over the number of purchases. 4. A monopolist can maximize profits by setting higher prices for more price-insensitive consumer groups and lower prices for more price-sensitive consumer groups. 5. Pricing theory based on discrimination is often used by companies in industries that produce products with low margin costs, such as publishing companies and airlines. Theory of Pricing Based on Discrimination or in English is known as Price Discrimination Theory, is a theory that describes how companies charge different prices to different consumers with the aim of maximizing company profits. In this theory, companies can charge different prices to the same consumer with the assumption that these consumers have different levels of elasticity of demand. The characteristics of the theory of pricing based on discrimination are as follows: 1. Charge different prices to different consumers. 2. There are three types of price discrimination, namely primary price discrimination, secondary price discrimination, and tertiary price discrimination. 3. The main objective of the company in discriminating price is to maximize the company's profits. 4. In discriminating price, companies must be able to distinguish between consumers who have different levels of demand elasticity. 5. Companies must be able to consider other factors such as production costs, level of competition, and government regulations. 6. Price discrimination will only work if the company has market power or is monopolistic. 7. Price discrimination can have a positive effect on consumers, especially those groups of consumers who have a low level of elasticity of demand. However, price discrimination can also have a negative effect on consumers, especially those groups of consumers who have a high level of elasticity of demand. 8. Price discrimination can be exercised on goods or services that cannot be resold or have a non-transferable nature, such as airplane tickets, concert tickets or telephone subscriptions. 9. Price discrimination is often used in business markets, for example by insurance companies charging different premiums to different customers. 10. Price discrimination is governed by government regulations, such as the Antitrust Law or the Consumer Protection Act. In practice, companies often discriminate prices, especially on certain products that have different levels of elasticity of demand for different consumer groups. However, companies must consider other factors such as production costs, level of competition, and government regulations in discriminating prices so as not to cause bigger problems for consumers and for the companies themselves. Theory of Pricing Based on Discrimination or Price Discrimination Theory is a theory that talks about the practice of setting different prices for different consumers in the same market. This theory is different from the monopoly theory, where in the monopoly theory, producers only supply certain markets at the same price. Meanwhile, in the theory of price discrimination, producers sell the same product in the same market at different prices. Some features of the theory of pricing based on discrimination include: o Producers set different prices for different buyers in order to maximize profits. o Producers must have monopoly power, so they can set different prices for each consumer. o Consumers who are charged a higher price may not be able to buy products from the market at a lower price. o Different prices applied to different consumers should be based on differences in their demand for the product or service. o Price discrimination practices can take different forms, such as price discrimination between regions or price discrimination over time.