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high revenue, more investment, low prices for some, manage demand
Advantages of price discrimination
enable some firms to stay in business who would have made a loss, e.g. train companies
Advantages of price discrimination: high revenue
increased revenue can be reinvested
Advantages of price discrimination: more investment
cross-subsidisation
When price discrimination leads to lower prices for some
old people more likely to be poor and are given lower fares from train companies
customers willing to research ‘special offers’ will be rewarded with lower prices
airlines can use this to encourage people to travel at unpopular times, avoiding over-crowding and spreading out demand
Advantages of price discrimination: manages demand
high prices for some(allocatively inefficient), reduced consumer surplus, potentially unfair
Disadvantages of price discrimination
people traveling at busy times
AO2 for high prices from price discrimination
contributes to inequality
Disadvantages of price discrimination: reduced consumer surplus