Price Discrimination in the Automobile Industry

When most people think of examples of perfect price discrimination things like sports tickets and airline seats come to mind. However, the automobile industry is another example that is often overlooked. Much like how sports tickets are sold, the buyer has many options that allow them to get relatively the same product depending on what they are willing to pay. In the automobile industry, the buyer is looking for a product to provide them with transportation and these cars can vary by the brand and the features they have. Very much like the buyer willing to spend money on box seats to a professional football game, ensuring that they will have the best experience possible with many luxuries that go beyond admission to the stadium, there are buyers who lean towards luxury car brands. Those in the market for a car that seats a lot of people can either buy a minivan or they can purchase a Porche Macan.

Also, within the price levels determined by the car being purchased price discrimination can be further applied to the purchase of the specific model of car. It is easiest to see this form of price discrimination when customizing a car on the manufacturer’s website. The buyer starts with the basic model of car that, no matter what brand, has the same safety features, heating/cooling, and entertainment systems in all of the cars of that model. However, the buyer has the option to upgrade these systems and the look of the car for an additional cost. For example, people can upgrade their speakers from Bose to Bang and Olufsen or they can add heated or cooling seats to the backseats of the vehicle. Furthermore, the options that the buyer has in the forms of maintenance packages adds to the price discrimination in the automobile industry. People can choose to pay nothing up front and risk paying for it later, or they can buy different levels of vehicle tune-ups.

Overall, the automobile industry is a subtle example of price discrimination. An industry, which when closely examined, practices price discrimination at many levels helping to clearly illustrate this economic principle. Sources https://www.investopedia.com/ask/answers/050715/how-do-companies-use-price-discrimination.asphttps://www.econstor.eu/dspace/bitstream/10419/50985/1/311925588.pdf https://courses.lumenlearning.com/boundless-economics/chapter/price-discrimination/