What is the effect of price discrimination in marketing?

Price discrimination is a marketing strategy where a business charges different prices for the same product or service based on various factors such as consumer characteristics, purchase location, or time of purchase. The correct choice highlights how this strategy allows businesses to maximize revenue by capturing consumer surplus from different segments of the market.

By setting varied prices, a business can appeal to different consumer groups—such as students, seniors, or frequent purchasers—who may have varying levels of willingness or ability to pay. This segmentation means that the company can optimize its income by extracting more from those who are willing to pay higher prices, while still attracting price-sensitive customers with lower prices.

This strategy does not equate to ensuring that everyone pays the same price; rather, it creates a structure where different segments of the market receive different price points, thus maximizing overall revenue for the business. It also does not eliminate competitive pricing; instead, it can coexist with competitive strategies as companies find unique ways to differentiate their pricing based on targeted consumer groups. Therefore, the essence of price discrimination lies in enhancing profitability through tailored pricing strategies.