Price Discrimination

Price discrimination occurs when a seller charges different prices to different customers for the same product. Such unequal treatment raises questions of fairness. Under certain circumstances, price discrimination may violate the Robinson-Patman Act’s prohibition against predatory pricing.

Price discrimination may violate our ethical intuitions. Behavioral economics teaches that people are highly sensitive to perceived attempts to exploit or price-gouge them. In a famous experiment by Daniel Kahneman and coworkers, 82% of subjects considered it to be “unfair” or “very unfair” for a hardware store to raise the price of snow shovels after a large snowstorm. Similarly, Coca-Cola was the subject of snide editorials and columns when it was rumored that the company had begun testing a vending machine that could automatically raise prices for its drinks ...