PRICE

... INIRODUCTION
Pricing is the most important element of the mar~eb~g Th, maining elements of the 4Ps cost
rum,
. mO< " '"" istho only ,tom,nt O f the marketing
mix, which generates a turnover ,or the orgamsatlon. e re
C'

money. Mix Product • It costs to produce and dest·gn ad product

Marketing
Marketing Mix Place • It costs to distribute a product an
Marketing Mix Promotion - It costs to promote products. fthe marketing mix. Getting Pricing correct
Marketing mix Price must support the other three eleme;ts t' nship and Pricing a product too high or
can be tricky; pricing must reflect supply a~d deman re a 10
too low could mean a loss of sales for the business.

DEFINITION , ·
. • the amount of money charged for a product ohr servi~e th benefits of having or using the product
the sum of all the values that consumers exc ange 1or e
or service

### PRICING OBJECTIVES

Prom Rtv1n111
Ma.x1n11ut1011 Mulmlutlon M1x1m111 ·
Quantity

Maxim,:• _.,· · Objective +- QUll!tY

ProfitMlrgln LUdtr

l
t
P111f1f Ootl
RtllOVtty
[ ,,N•• 1tatu1 Quo

Before any pricing decisions nre made, a company must establish what it means to achieve through
pricing, Often, these objectives include:
I, Profit MaxlmlzaUon: Keeping in mind revenue and costs, a company may want to maximize profits.
Profit maximization objectives should be long term and not focus only on the short tem1.
2, Revenue Maximization: With less focus on profits, a company may focus on increasing revenues in
order to increase market share and lower costs in the long term,
3, Maximize Quantity: A company may 'Want tci sell a specific number of items to decrease long tenn
costs.

4, Maximize Profit Margin: Another objective may be to increase the profit margin for each unit and
not focus on the total number of units sold.

j
5. Quality Lt'adt'r: A com an . . . . . .
10
quality leader. p Y may \\ant use pnce to signal high quality lllld establish nse\f !IS lhc
6; Partial Cost Recovery• If . .
1111
rcco vcnng
. a hundrcd percent· of itsorgll!Uzation
costs. has multiple revenue streams, it may not be too focused on
7. Sunival: Sometimes the best · · ·
market If the k I · • · d 1· a company may want to do ts to cover costs and to rcmlUJl in tho
pnonty
. . over profit
mar e is 111 cc tne or there nrc too many competitors, survival may take temporary

Status Quo: There may be a need to ovoid price wars with competitors. So o company may maintain
a8,stable price to continue a stable profit level. ·

### BASIC PRICING PROCESS

A company's pricing strategy and method changes with circumstances and time. This is why there is no
fixed guideline: to aid a company in its pricing endeavors. However, the f~llowing steps can act as n
methodology
general
1. Develop Marketing Strategy

A detailed market analysis acts as a logical starting point for pricing decisions. A business follows up a
market analysis with a division and defmition of the market into segments each with its distinct
requirements and needs. After this, a decision needs to be made regarding the desired segments to be
targeted. The product and brand positioning is then based on these identified segments.
l. Make Marketing Mix Decisions
Once the segments and positioning is somewhat in place, the marketing mix planning comes ·into effect.
Herc the product, distribution, and promotional elements are decisions to focus upon and to finalize.
3, Estimate Demand Curve
Another market analysis needs to be conducted. e: this point. In this one, there needs to be spccUl'-
infonnation gathered about how the price affects the quantity of the product demanded.
4. Calculate Costs

A company can now get an accurate assessment of the total fixed and variable costs cssociatcd with the
product. These are-a necessary inputs for pricing decisions as the final price needs to at least cover these
costs.
5. Assess Environment
Another vital element that feeds into pricing is the environment. This means an understanding of the
competitor's strategies, their product and its value as well as an understanding of any industry or legal
constraints.
6. Set Pricing Objectives
As detailed above, there are several objectives that a company can have from its pricing strategy. This is
the point in the process that those objectives need to be discussed and agreed upon.
7. Determine Price
Using 1111 the infonnation collected and analyzed till this point, a company is now in a good position to
set the best price for its products. A pricing method and structure can be fonnul11ted along with any
possible sales promotions or discounts.
These steps are no necessarily 1111 followed in this sequence. Some steps might be skipped or bundled
together, while others perfonned at different stages in different order depending on several factors, like
product or business model.
 ### FACTORS THAT AFFECT PRICING

I There are several basic factors that affect ""7. fi

• pncmg or almost 1111 co
categonzed as internal factors and external factors.
Internal Factors
These are those elements that are under the control of th
· ,
mp11mes and industries. These cun be

· · . .
, . e org11mzat1on,
though they may be within the company's domain of control changm' · th However, It 1s vital to note th11t
b •
. , g em may not e 11s e11sy 11s 1t
seem~. For example, production process changes may require significant cost, time and process
redesign. Internal factors include:
• Fixed and variable Costs
• Company objectives and strategies
• Market segments, targeting and positioning decisions

External Factors
Those factors which have a significant impact on pricing decisions but are not completely controllable
by the company are known as external factors, Since these are very important to the pricing method, a
company can exert some control by conducting detailed analyses to understand in depth how these
factors will behave. External factors may include:
• Competitors
• Target market behavior and willingness to pay
• Industry trends
• Industry or legal Constraints

### PRICING METHOD§

To set the specific price level that achieves their pricing objectives, managers may make use of several
pricing methods. There are thre broad classifications of pricing as explained in the following sections:
• Cost Based Pricing
• Demand Based Pricing
• Market Based Pricing

Cost Based Pricing:

Cost based pricing is based on costs of production and marketing but it will build in additional factors
such as market conditions to set pricing, This method uses cost of the product as the basis of pricing.
Cost based pricing can be useful for firms who want to base their products on costs but operate in an
industry where product pricing changes regularly (volatile pricing),

.Primary type of cost based pricing is Cost-Plus Pricing, This is also known as Mark-Up Pricing.
Cost-Plus Pricing:
• This pricing method aims at setting the price at the production cost plus a certain profit margin.
That Cost-Plus Pricing is a price increment that is added to the cost of providing the product or
service. The mark-up provides the profit margin.
• Cost-plus price is based upon a mark-up on the cost of an item. This method is extended to /
specific customers for specific price classes only. The mark-up percentage may be set
individually for each customer and for each price class for that customer.

)
 • Cost-plus pridog • worl<s wdl when the buye, and """ don't know whot the cost or production
will be but agree on a target profit over and above the product cost.
• Cost should always be tbe b.,. for ony pricing dedsion. Cost driv"' an> eith" measu,cd or
estimatod and then covcml by"'" prieo + oddod m.,..,;n. Tho main probl<m• of a cost basod
pricing ,oa1egy arc that cost voriobles arc mon, or Jos• time dependent and that volwn• will
atfcct the UIUt prlco(-log), The ,ales volume is 01'0 in conclatod to pricing, (Richords, 200S).
• Another ditlicUlty is that th• model is somewhot stilf ond will not be easy to change when
competitive circwnstance, ,equire chonge. This could lead to prices thol are too high or too Jow
on the morket. Cost-plus pricing involves setting price by starting with th• cost to provide •
. product or service and then adding a mark-up above the cost, Th• mark-up provides th• company

with its profit margin.

The advantages of Cost-Plus Pricing:

• It is easy to apply because it's based on cost data. · ·
, Mark-ups con be based on industty standards, individual CXpert opinions, or widely accepted

• rules-of
Cost-plusthumb.
pricing almost guarantees that you will not sell at a Jo,s, so a cost-plus figure generally
provides a basis for the lowest price acceptable.
• Companies are not required to follow the ups and downs of prices in the market.

The•disadvantages of Cost-Plus
Businesses that Pricing:their costs accurately may set prices at a level that does not
cannot identify

• recover actual
Cost-plus costs.
pricing takes into account the cost and profit side of buying and selling, but it neglects

• demand.
Cost figures are generally based on an assumption of sales/production numbers.

i Demond
Demand Based b-1 pridng is a pricing model lhot rclics on tho customCr demand tr.;.,d,
Prlcln.J[i. to adj.isl the
pricing of a product or service. It is also sometimes referred to customer-based pricing, as
customer demand is part of the pricing model.
• Jn this approach, the primary change from traditional pricing models is that internal factors are not
what ?ecides a p'.°duct's price, Even though the cosfof developing p,oduct at1"1bu\es, purchasing
matenal, production, and other miscellaneous costs should be considered, this model primarily
focuses on consumer demand • an external factor, to decide the price.

The_re are two major types of demand based pricing:

Penetration Pricing:
::,e';~~:t~t•: : 7~del ~:t ats 10 initially attract • customer base and effectively penetrate into a
mo,o attractive to its :u:to;::,, at y selttng a below-overage Initial price, hence making it finandally

The overarching goal of this pricing strategy is to:

• Capture market share
 • Crentc brnnd loyalty
• Switch customers from competitors
• Generate significant demand, looking to utilize economies of scale
• Drive competitors out of the market t•
Situations where penetration pricing works effectively:
• When there is little product difTerentiation '
• Demand
Where theis product
price-elastic
is suitnble for o mass market (and, therefore, for utilizing economies of scale)

, Blah ofadoption
Advantages Penetradon
and Pricing
diffusion: Penetration pricing enables a company to
. product or
get its
service quickly accepted and adopted by customers. . ..
Marketplace dominance: Competitors are typically caught off guerd by a penetration pncmg
strategy and are afforded little time to ·react. The company is able to utilize the opportunity to
switch over as many customers as possible.
• Economies of scale: The pricing strategy generates a high sales quantity that enables a finn to
realize economies of scale and lower its marginal cost.
• Increased goodwlll: Customers that are able to find a bargain in a product or service are likely
to return to the firm in the future. In ·addition, this increased goodwill creates positive word of
mouth.
• Hlgb inventory turnover: Penetration pricing results in an increased inventory turnover rate,
making vertical supply chain partners, such as retailers and distributors, happy.
Disadvantages of Penetradon Pricing
• Pricing expectatlo_n: When a finn uses a penetration pricing strategy, customers often expect
permanently low prices. If prices gradually increase, customers may become dissatisfied and
may stop purchasing the product or service.
• Low customer loyalty: Penetration pricing typically attracts bargain hunters or those with low
customer loyalty. Said customers are likely to switch to competitors if they find a better deal.
Price cutting, while effective for making some immediate sales, rarely engenders customer

loyalty.
• Damage brand Image: Low prices may affect the brand image, causing customers to perceive
the brand as cheap or poor quality.
• Price war: A price penetration strategy may trigger a price war. This decreases overall
profitability in the market, and the only companies strong enough to survive a protracted price
war are usually not the new entrant who triggered the war.
• Inefficient long:term strategy: Price penetration is not a viable long-tenn pricing strategy. It is
u.suall~ a better idea to a~pr~ach the marketplace with a pricing strategy that your company can
hv~ with, long-term. While it may then take longer to acquire a sizeable market sha h
1 1
patient, long-term strategy is more likely to serve your company better overall and re .:ulc a
expose you to severe financial risks. ' ess 1 e y to

Skimming Pricing:
Price skimming is a model where a seller initially sets an infl d · -
lowers the price as time goes on. The price set at the Iaunch is. ate .pnce
as high to aconsumer
as the product and then eventually
is willing to pay.
The model aims to get nil the h'
the consu mer surplus decreases•gh-end
overt' customers 111 · the. 111itinl
. lnunch period to cover their bnsic cost. As
ice 5ki mmmg · where sellers initioll•me, .sellers
· ts . nd'uu 5I thcir, pnces
• to uccommodntc consumer needs. So
Pr
. . , consumers.
pnce-sens1t1ve y nun to cnpture h'1gh-end consumers ond then eventunlly capture
From how the strategy is structured 1't' 8
buzz in the market These d t ' moStly employed for products thnt arc new nnd attract all tho
· pro uc s can be newly t h d . .
the market. As the com etition o . n~nc e novel technologies thot arc among the first m
th t hn I th .P . gr ws over time, with new companies producing different renditions of
e ec o ogy, e pricing 1s then also adjusted to match the market average.

Advantages of Price Skimming

• Perceived quality: Price skimming helps build a high-quality image and perception of the
product; ·
• Cost recuperation: It helps a firm quickly recover its costs of development.
• High profltablllty: It generates a high profit margin for the company.
• Vertical supply chain benefits: It helps distributors earn a higher percentage. The markup on a
$500 product is far more substantial than on a $5 item.

Dlsadvantages
• Deterrence: If the firm is unable to justify its high price, then consumers may not be willing to
purchase the product.
• Limitation of sales volume: A firm may not be able to utilize economies of scale if a skim price
generates too few sales.
• Inefficient long-term strategy: Price skimming is not a viable long-term pricing strategy, as
competitors will eventually enter tho market with rival products and exert downward pricing
pressure. • Of $200 1·n a
• Consumer loyalty: If a product thot costs $1,000 at launch hns a follow-on pn~e
couple of months, innovators and early adopters may feel ripped off. Therefore, if the fi~ has a
hlstory of price skimming, consumers may wait a .couple of months before purchasing the
product.
 Advantages of D
ernand-Based P
• It can h I . ricing:
e p you optimize rev
lo get as lllUch mileage as enue_ generation: Every brand
strategy that eflicc t'tve 1y ca possible
· I' out of consumer de of demand-based
d pricing is structured
Where it might stand Pita izes on the demand r, .man . 1f company can put together a
• Certa· . - company can put their b . or. 11s product or service - regardless of
. in strategies can better serve custom b us1ness •n a solid position to ma.ximize revenue
pnces a · Cl'll Yensun ·
. s a time-bound product comes closer t ng access to fixed inventory: By adjusting
essentially maintain some access to that produ ; ~e en? of its frame of availability, company
that product will be pricier they'll still b th cfis ixed inventory. While the remaining units of
boos t customer satisfaction.
, ' c ere or last-second buycl'll - in · many cases, that can

Disadvantages of Demand-Based Pricing:

• It can be labor-intensive· Demand based . . . .
company can't construct, one of pric~g is never completely intuitive, In most cases,
intensive research and a fair amount :~~:~:::~o~~sed on hunches .and guesses - it takes
th
• Nproepne odf t at com~s easily. It's a labor-intensive, often stressful process - and if you're not
are o commit to doing it right ·h b b . .
. . method,
pncmg , you nug t e . etter off sticking to a more straightforward

• It c~ be extremely ~nicky: Demand can be volatile and tough to predict. Even with extensive
mar et research ~ehind company's strategy, there's no guarantee that demand will play out as
company expect 1t to,

Market-Based PrlclnK
• Market pricing is based on the results of the market research, which should tell the status of the
potential customers' 'willingness to pay for the product, or service.
• In Market-Based pricing, the producer generally researches how much is usually paid for 11
certain product in the markets. This can be benchmarked by comparison. If this model is used,
then the price elasticity of demand (for further infonnation refers to elasticity theories) should be
known.
• Large and positive elasticity in the price/volume relationship indicates that reductions to the
general price level can be made quite safely. If elasticity is negative, a price increase should be
considered. On the other hand, plain willingness to pay is not enough if the potential customer
base has no disposable assets or credit (also current liquidity) for the purchase. Thus, you need
supporting data on specific and detailed markets as well as analyses of consumer purchasing
behavior. (Richards ym. 2005)

Prices are based on the going rate for the product or service. The going rate is derived from two factors:
• What competitors are charging
• What customers are willing to pay

Based on this premises there are three type of market based pricing:
• Premium Pricing: Setting price much more than the competitors or market average
• Discount Pricing: Setting price less than the competitors or market average
• Parity Pricing: Setting price in tune with the competitors or market average

l
Different features to be considered in researching this method of pricing:
• Is your product more convenient to buy than the competitors?
• Are you selling when others are not?
• Is your product unique, or very rare?
• What is the marketing mix for your particular product/service and profile of your customer base?

The advantages of market-based pricing:

• It keeps you competitive with direct competitors in the eyes of your customers.
• It is relatively fast to develop since competitor price comparisons is at bond.
• Market-based pricing is easier for customers to understand.
• If the market price set by your competitors enables them to make a profit, your business should
be able to make a profit at this price point as well.

The disadvantages of market-based pricing:

• The market price may not provide you with the profit margin you want.
• Market-based pricing generally does not take into account non-traditional competitors like niche-
players and/or new entrants that offer potential substitutes for your product/service.
· • Market-based pricing requires that company must track the .market price (i.e. need to have
allocated resources with responsibility for this key critical task)

FEW OTHER IMPORT ANT PRICING STRATEGIES:

### Value-Based Prlclng

Base the price on the effective value to the customer. The price is based on on estimate of the maximum
perceived value of the product or service and the maximum price customers will pay, Value may be one
of the most overused and misapplied tenns in marketing and pricing today. ·
Value pricing Is too often misused as a synonym for low pricing. The real essence of value revolves around the
trade-off between the benefits an lndlvldual gets from a product/service vs. the price he pays for It, or more
accurately the perceived benefits received and the perceived price paid,

Advantages of Value Based Pricing

• Increases profits. This method results in the highest possible price that you can charge, and so
maximizes profits.
Customer loyalty. Despite the high prices charged, you can achieve extremely high customer
loyalty for repeat business and referrals, but only if the service or product provided justifies the
high price. This advantage tends to also derive from the nature of the sales relationship, which
needs to be both close and trusting before value based pricing can even be contemplated,

Disadvantages of Value Based Pricing

• Niche market. The very high prices to be expected under this method will only be acceptable to a
small number of customers, It may even alienate some prospective custofners.
• Not scalable. This method tends to work best for smaller organizations that are highly
specialized. It is difficult to apply it in larger businesses where employee skill levels may not be
so high.
 • Competition. Any company !hat .
deal of room for competitors to 0 :;:.~::en!ly. engages in value based pricing is leaving a great
• labor costs· Assum,· th . er pnccs and rake away !heir market share.
·
skill set that the ng at a service is bein 8 provr'ded, you are likely
· • such a high-en
offenng · d
1
. k th h emp oyees needed to provide the service will be quite expensive. There is also o
ns at t ey may leave to start competing finns.

### Psychological prlclnK

Psycbologlcal p~lcln~ (also price ending, charm pricing) is a pricing/marketing strategy based on the
theory that certain pnces have a psychological impact. The retail prices arc often expressed as "odd
prices": a little less than a round number, e.g. $19,99 or £2.98, Consumers tend to perceive "odd prices"
as being significantly lower than they actually ore, tending to round to the next lowest monetary unit.
Thus, prices sucli as $1.99 are associated with spending $1 rather than St The theory that drives this is
that lower pricing such as this institutes greater demand than if consumers were perfectly rational.
Psychological pricing is one cause of price points.
Psychological pricing uses the customer's emotional response to encourage sales, By pricing products
strategically, a company may increase sales without significantly reducing prices. In some cases, a
higher price is actually more likely to increase sales,

Advantages of Psychological Pricing

• Overall Improvement. As general as it might sound, this includes but not limited to: raising
profits, growing customer base, increasing sales and conversions, attracting potential business
deals ... just to name a few, What was the main goal into using such a strategy after all? To make
more money!
• Emotional-Based Prlclng, Since the psychology of pricing focuses on the weakness of how
human beings tend to look at prices in a non-rational perspective, plus the fact that wc arc all
humans here, the strategies will be effective against everyone, Secondly, if II test on any tactic is
required, we can easily test them on ourselves.
• Employee Control. There was a widely believed origin of odd-even pricing which derived from
a real life incident as is: back then in supermarkets, most products were priced at a clean and
simple price such as $50.00, therefore usually did not require cashiers to open the tray and give
back changes. As a result, cashiers often took the money straight to their pockets without
punching a transaction into the database. But realistically, we have security cameras today,

Disadvantages of Psychological Pricing

• Calculation ComplJcatlon, In fact, many people are wise consumers, most read their receipts
after a shopping session, to check if they could spot any transaction mistakes, The problem is
that most people are not electronic calculators and having to add up loads of numbers like $14.99
is surely a big amount of-trouble.
• Rational Decision-Making. Although not everyone pays much attention into the true cost of a
price especially when it is masked with a ".99'' ending, some people still do value their efforts
into calculating individual prices carefully, therefore psychological pricing may not work on
everybody as it is dependent on different types of audiences,
 frlce Dlscrlmlnatloni
Price discrimination means charging d'lli ·
1
erent pnces from different customers or for different units of
the same product. In_the words _o fJoan Robinson: "The act of selling the some article, produced under
single control at different pnces to different buyers is known as price discrimination." Price
discrimination is possible when the monopolist sells in different markets in such a way that it is not
possible to transfer any unit of the commodity from the cheap market to the dearer market.
Price discrimination is, however, not possible under perfect co~petition, even if the two markets could
be kept scparpte. Since the market demand in each market is perfectly elastic, every seller would try to
sell in thPt market in which he could get the highest price. Competition would make the price equal in
both the markets. Thus price discriminPtion is possible only when markets arc imperfect.

Types of Price Dlscrlminadon;

Price discrimination is of many types:
• Firstly, it may be personPI based on the income of the customer. For example, doctors and law-
yers charge different fees from different customers on the basis of their incomes. Higher fees are
charged to rich persons and lower to the poor.
• Secondly, price discrimination may be based on the nature of the product. Paperback is cheaper
than the deluxe edition of the same book, for the fonner is bought by the majority of readers, and
the latter by libraries. Unbranded products, like open tea, are sold at lower prices than branded
products like Brooke Bond or Lipton tea.
• Economy size tooth pasies are relatively cheaper than ordinary-sized tooth.pastes. In the case of
services too, such price discrimination is practised when off-season rates of hotels at hill stations
are very low as compared to the peak season. Dr1-o!::aning firms charge for two'while they clean-. •
three clothes during off-season; whereas they charge more fur quick service in peek reason.
• Thirdly, price discrimination is also related to the age, sex and status of the customers. Barbers
charge Jess for children's hair-cuts. Certain cinema halls admit ladies only at lower rates.
Military personnel in unifonn are admitted at concessional rates in all cinema houses.
• Fourthly, discrimination is also based on the time of service. Cinema houses at certain places,
like New Delhi, charge half the rates in the morning show than in the afternoon shows.
• Fifthly, there is geographical or local discrimination when a monopolist selis in one market at a
higher price than in the other market.
• Lastly, discrimination may be based on the use of the product. Railways charge different rates
for different compartments or for different s.ervices. Less is charged for the transportation of coal
than for bales of cloth on the same route. State power boards charge low rates for industrial use
than for domestic consumption of electricity.

Conditions for Price Discrimination:

For price discrimination to exist the following conditions must be satisfied:
(1) Market Imperfections:
Price discrimination is possible when there is some degree of market imperfection. The individual seller
is able to divide and keep his market into separate parts only if it is imperfect. Customers do not move
readily from one market to the other because of ignorance or inertia.
(2) Agreement among Rival Sellers:

I,
 .
price discrimination also takes place when the seller of a commodity . is.
enter mto an. agreement
, for the sale of the product at diffc monopolist °' when rivals
rent prices to adiro
.
usually possible
, h , m thed sale ,of direct services. A single surgeon ma y charge a high e_rentfee
customers.
for a This. is
rrom a nc patient an _relauvaly low fee from apoor patient. n opernnon
• place where
In f th a ·number of surgeons and , physicians practice' they charge their • ees according to the
income o e patients. The rate of fee ts fixed for each category of patient Lawyers chargc f:ram their
, ·
clients m proportion to the degree of risk or amount of money involved in a law suit. Price
discrimh1ation is possible in the case of services because there is no possibility of resale.
(3) Geographical or Tariff Barrier~:
Discrimination may oocur on geographical grounds, The monopolist may discriminate between home
and foreign buyotS by selling at a lower prico In the foreign market than in the domestic market. This
type of discrimination Is known " "dumping". It can only be successful If the commodities sold abroad
can be prevented from being returned to the home country by tariff restrictions.
SometimeS uansport costs .,. so high that they act as a safeguard against the return of dumped goods,
Geographical discrimination satisfies Pigou's.first condition for discrimination 'when no unit of the
commodity sold in one market CllO be transfened to another,' ·
(4) Differentiated
Dlscrimin•tion is Products:
possible when ·buyers need the same service in cooneetion with ditrerenliated
products. Railways charge different rates for tho transport of coal and copper. For they know that it is
physically impossfole for a copper merchant to convert copper into coal for the pwpose of transpor1Ul8 ii

cheaper.
Thia satisfies Plgou's second condition that 'no unit of demand proper to ono market can be uansferred
to another.' It also applies to discrimination based on as• ,ex, • - and inco!n• cf buyers of services.
For instance, a rich man cannot become poor for the sake of getting cheap medical facilities.
(5) Ignorance of
DJ.,rimu>"don ""'"" whoo ,mau monufactu""
Buyers:
,tso ,,n good• mad• to """'· 'ThOY ,ws• differont
""' to different buyers depondh,g upon the Jnte.,.ity of th•" d,mm,d for tho produot. Sh•• mak"'
cJwrgo, hJgh price for th• some variety from those customers who want thorn earlier thon other,. For tho
s,mo variety of shoos, difforent buyers are also cbargol diff-t prices because individual buyers are

not in a position to know the price being charged to others.

(6)monopolist
A Artificial Differences betweendifferences
may create artificial Goods: by presenting the same commodity in different quantities,
He may presoit it under different names and labels, one for the rich and snobbish buyers and the other
for tho ordinary, Thus ho may charge different prices for substantially the same product. A washing soap
manufactull\r may wrap a small Quantity of the soap, give it a separate name and charge a higher price,
He may sell it at Rs 17 per kg. As against Rs 16 for the unwrapped soap. ·
(7)
ForDifferences In Demand:
price discrimination, the demand in tho separate markets must bo considerably different. Different
prices can be charged in separate markets basol on differencc.s of elasticity of demand. Low price i•
charged where demand is more elastic nnd high price in the market with the less elastic demand.