price discrimination occurs when a seller forbids a buyer from buying products from the sellers competitors
true or false
The correct answer and explanation is:
The statement is false.
Price discrimination occurs when a seller charges different prices to different customers for the same product or service, and it is not dependent on forbidding a buyer from purchasing from competitors. The practice of forbidding buyers from purchasing from competitors is more related to anti-competitive behavior, such as exclusive agreements or tying arrangements, rather than price discrimination itself.
Price discrimination can take various forms. The most common types include:
- First-degree price discrimination (or personalized pricing): This occurs when a seller charges each customer the highest price they are willing to pay. This type is most often seen in negotiations or auctions, where the price varies for each individual buyer based on their personal preferences, urgency, or bargaining power.
- Second-degree price discrimination: This happens when the price varies based on the quantity or quality of the product purchased. Bulk buying or product bundling often reflects this kind of discrimination. For example, a company may offer discounts to customers who buy in large quantities.
- Third-degree price discrimination: In this case, different prices are charged to different groups based on observable characteristics such as age, location, or income. Student or senior discounts are common examples of this kind of pricing. Movie theaters, for instance, often charge lower prices to students and seniors compared to adults.
Price discrimination is typically legal in most markets, though it can be scrutinized or even regulated in certain situations where it may have anti-competitive effects or exploit consumers unfairly. However, forbidding customers from buying from competitors falls under different forms of market manipulation or monopolistic practices, which are often illegal under anti-trust laws.
In summary, price discrimination is about charging different prices to different customers, not about restricting access to competitors.