PRICE DISCRIMINATION

practice of selling a commodity at different prices to different buyers, even though sales costs are the same in all of the transactions. Discrimination among buyers may be based on personal characteristics such as income, race, or age or on geographic location. For price discrimination to succeed, other entrepreneurs must be unable to purchase goods at the lower price and resell them at a higher one. Legislation against price discrimination has usually sought to prevent its use by one seller to drive a competing seller out of business by underselling the competitor in his own market while selling at higher prices in other markets. One of the most notable examples of price discrimination was practiced in the late 19th century by American railroads, which gave favoured customers lower rates and charged higher rates for short hauls than for long hauls. German industry practiced another type before World War I by maintaining a high domestic price through high tariffs and selling abroad at a loss, thus gaining control of foreign markets.