Smarter Pricing: How to capture more value in your market

Third-degree discrimination

Third-degree discrimination occurs when a segmented market permits watertight sales to one group at one price and to another group at another level with no arbitrage or transfer taking place between the segments.

Another form of third-degree discrimination occurs when different prices are charged through different sales channels.

For third-degree discrimination to succeed it must be acceptable to legal jurisdictions and either be invisible to customers or if visible, to appear justifiable. Customers appear to accept that on-line prices for air fares will be lower than fully serviced travel agent prices. They identify with different value obtained through the different channels.

The simplest form of price segmentation ...