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Question
Answer the following question.
Discuss briefly the meaning of "Price discrimination" and "Product differentiation" with the help of suitable examples.
Solution
Price Discrimination -
Price discrimination implies charging different prices for the same product from different buyers at the same time. A monopolist firm enjoys the freedom to follow price discrimination. That is, in other words, it can sell the same product to different buyers at different prices at different time periods. For example, a monopolist charge the maximum price that each buyer is willing to pay.
Product Differentiation -
Differentiated Products imply that the products are similar to each other and perform the same basic function yet are different from each other in some or the other manner. The products are hypothetically differentiated from each other by the producers through advertisements. Take the example of shampoos.
Although the basic function of a shampoo is to clean the scalp but the producers try to differentiate their respective brands by highlighting some unique features such as anti-dandruff, anti-hair fall, protein-rich shampoos, hair root-strengtheners, etc.
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| A trademark is a recognisable phrase, word, or symbol that denotes a specific product and legally differentiates it from all other products of its kind. Registering a trademark prevents others from using it so that consumers are not confused about the product. Trademarks add value and recognition to a company. Therefore, a company with well-established trademarks and brands in its portfolio enjoy a good reputation in the market. It also makes it easy to raise money from the stock market or borrow from lenders. |
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