What is the practice of charging different prices to different consumers called?

The practice of charging different prices to different consumers is known as price discrimination. This strategy allows firms to maximize their profits by charging higher prices to consumers who have a higher willingness to pay and lower prices to consumers who are more price-sensitive. Price discrimination can take various forms, such as student discounts, senior citizen discounts, or dynamic pricing based on demand fluctuations, and it relies heavily on the ability of the seller to segment the market effectively and prevent resale between consumer groups.

Understanding price discrimination is crucial because it illustrates how businesses can use consumer data and market conditions to enhance their revenue while still catering to a broader audience. The practice hinges on factors like demand elasticity and market competition, which influence how much different customer segments value a product or service.