Price differentiation–means that prices change according to certain conditions, and is the right tool to improve market position and sales volume. However, for companies to use this method, changes in occupancy rates should not be associated with changes in average costs, and each buyer is willing to buy a product at a different price, which can be, for example, the day and night currents of electricity when the night current is much cheaper.
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Price discrimination –means different prices for different consumers. The rules on price discrimination are provided for in the Competition Law, which defines prohibited contracts between entities (for example, mutual sale of goods). However, in order to benefit from price discrimination, conditions (especially those related to market or buyer separation) must be met. So, for example, there are discounts related to certain groups of the population (students, elderly people, families)…). Having met it, perhaps, each of us, for example, there are discounted tickets to the zoo. But there may be price discrimination based on location (for example, seats in the theater – the first row is more expensive, the balcony is an additional fee, and the lodge also includes an additional fee).
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However, price determination also affects the competitive environment.The closer the market situation is to a monopoly, the more opportunities this company has to influence the market price. Therefore, the monopoly market is considered the ideal of independent decision-making. The oligopolistic market is characterized by fairly stable prices. Therefore, companies operating in the oligopolistic market will want to keep prices at their current capacity, despite the change in the cost per unit of this electricity, mainly in order not to cause a price war, which is a very dangerous problem in this market. In order for oligopoly companies to succeed in the price war, the conditions of this market must be perfect (the same demand structure, the same competitive conditions). But at the same time, in order to lower the price and cover the demand of the entire market, the costs of one enterprise must be much more favorable than those of others.