What kind of pricing strategy occurs when different prices are charged to different customers for the same product?

Price discrimination is a pricing strategy where a company charges different prices for the same product to different customers. This practice is based on various factors such as customer characteristics, purchase quantities, and market segmentation. The key objective of price discrimination is to maximize profits by capturing consumer surplus from different segments of the market.

For instance, a company might charge a lower price to students or seniors, while charging a higher price to general customers. This type of strategy relies on the company’s ability to prevent resale among customers and to segment the market effectively. It reduces overall price elasticity for the product, allowing the firm to extract more revenue from those willing to pay a higher price.

Other strategies like cost-plus pricing focus on marking up costs to set prices, dynamic pricing adjusts prices based on market demand or other factors in real-time, and penetration pricing involves setting a low initial price to gain market share. Each of these strategies serves different market conditions and objectives, but they do not involve charging different prices for the same product based on customer segmentation in the same way that price discrimination does.