I don’t think it’s fair. It feels predatory. However, price discrimination is nothing more than the fact that the exact same product is sold to different people at different prices, even if the seller’s costs for the goods sold are the same.
The logic isn’t about hating anyone. It’s all about segmentation. Sellers take into account personal characteristics such as income, age and place of residence. They look at where you live. If you’re in a high-demand zip code, you may have to pay an additional fee. If you’re a student, you might pay less. The goal is to capture value from everyone who is willing to pay, rather than sticking to one payment.
However, there are strict rules. For this to happen, arbitrage must be impossible. Other buyers cannot buy products at a lower price and sell them at a higher price. If this happens, the system will crash. You can’t stop someone from buying bulk deals and flipping them on eBay. As such, this is most evident in digital products, services and perishables. You cannot resell a hotel room you have already stayed in. Also, digital licenses cannot be resold after activation.
The Legal Line Between Strategy and Predation
Laws against price discrimination usually draw specific boundaries. It does not prevent companies from charging different prices to different people. This is legal. It tries to prevent one seller in a given market from using lower prices to drive competitors out of the market.
Imagine that a big chain comes to town. They sell below cost locally. In other markets where there is no competition, they charge higher prices. They use their profits elsewhere to support their losses in their target market. This is the kind of predatory behavior that the law aims to prevent. This has nothing to do with consumer fairness. This is aimed at maintaining competition in the market so the monopoly doesn’t win by default.
The German model: Sell at a loss to win the world
Before World War I, German industry took a different approach. They practiced so-called strategic dumping. Domestic prices remain high because they are protected by high tariffs. This has kept domestic profits healthy. Then they sell it abroad at a loss.
Why sell at a loss? To gain control over foreign markets. They are ready to bleed cash in international waters to assert their superiority. As they increase their market share, their influence changes. We don’t just sell widgets. This is about geopolitical and economic strategy. This is a long-term game that prioritizes market control over short-term gains.
Does this really harm consumers?
The question of whether price discrimination harms consumers is still controversial. There is no simple “yes” or “no”.
On the one hand, it feels like it imposes a toll on who you are or where you are. You may have to pay more for the same service because your IP address is different or you bought the ticket on a different day. That feels arbitrary. It felt like a punishment.
On the other hand, price discrimination can also enable market entry. Without it, the company can charge one higher average price. Low-income people are completely left out. By offering a lower-end product to those who cannot afford the higher price, more people can use the product. Aviation is a classic example. Business travelers pay full price. Leisure travelers can book weeks in advance for a fraction of the price. The plane flies anyway. both
