Sunday, September 30, 2007

Price Discrimination in Action

As a quick reminder, price discrimination is the practice of charging different groups of people different prices based on differences in their willingness to pay. Want to see it in action? Try going to the web site of a major computer manufacturer that offers solutions for different groups like large businesses versus small businesses. Enter the web site twice, once through each link, and price the exact same product.

I tried this recently and got a 20% lower price on a new notebook computer when I entered through the low-value group link (small business) versus the high-value group link (large business). What I don’t quite understand is why the high-value group just doesn’t mimic the behavior of the low-value group. Maybe the manufacturer is offering other services to the high-value group that can only be accessed through the high-value group link.

FYI - I generated the quotes for a Latitude D830 from Dell's online store.

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