Price Discrimination In America

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Car buying is about as American as baseball. Well, not literally but they both trace as far back as the 19th century. Most Americans have experienced going to a car dealership and purchasing a new or used vehicle. Those experiences vary greatly with many factors including: age, gender, income, occupation, credit history, personality, appearance, and anything else one can think of. Some of those factors happen to play a vital role in price discrimination. Price discrimination is the practice of a seller charging buyers different prices for the same products based on the time of day, age, or any other factor to increase profits. Money Economics published an article detailing how car buying and price discrimination go hand in hand. The article describes how car dealerships may be the most common place where price discrimination exists because most of the time, no two customers pay the same price for the same car (Bar, 2007). The reason firms utilize price discrimination is to increase profits; that is there bottom line. Sellers often identify groups of consumers by willingness to pay and adjust prices accordingly. An example used was two customers at a movie theater. Suppose customer A is at most wiling to …show more content…
The writer details his own experience of car buying by sending an e-mail to multiple dealerships requesting price quotes. Sending an e-mail to numerous dealerships puts them on the defensive as they try to win your business. Now the sellers see you are comparing prices and in turn, you are portraying customer A, someone who has a low willingness to pay. They also realize they are competing for the lowest price. The writer was able to maximize his low willingness to pay portrayal by using his student e-mail account, as students tend to be grouped with a low willingness to pay. Ultimately, he received a wide range of prices for the same model of car and ended up seeing some enticing offers before he even walked into a dealership’s
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