Bennett Pope, chapter 1, question 6

An idea in the text that was intriguing to me was price discrimination. The general idea behind price discrimination is that different people are willing to pay different amounts of money for goods and services, so businesses often charge different prices. If the business charges a uniformly higher rate, they miss out on the business of those who only would have payed at a lower rate. However, if they charge the lower rate, they miss out on the money some people would have been willing to pay. The solution is to offer different prices to different customers.

I was not aware of this concept before I read the chapter, and my first thought was that it seemed a bit underhanded. It is one thing for somebody to seek out a better plane ticket than me (to use the same example as the book), but another thing completely for the airline to charge me more because they know I'll pay for it, giving me no other choice. While I stand by my opinion that price discrimination is a little unfair, I cannot deny that it is a brilliant way of maximizing profits. Bussinesses need the business of both types of customers, and price discrimination allows them to make as much money as possible from each customer assuming they work the system correctly. I also found the psychology of price discrimination interesting because the businesses have to analyze buying habits to determine how much they can charge certain types of customers just by the way they buy goods and services.