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Mico Econ

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How is peak load pricing distinguished from price discrimination.

  • Mico Econ -

    Peak-load pricing is recognition that the demand for some service is greater at certain times compared to others. That is the, demand curve keeps shifting in and out, depending on the time. The seller, recognizing this shifting, adjusts his prices accordingly to maximize profits. So, for example, hotel rates on the beach are much higher in July than in February.

    Price discrimination is a recognition that different groups have different demand functions, and the seller can charge one profit-maximizing price to one group and another profit-maximizing price to another group. For example, a senior discount at movie theaters is a form of price discrimination.

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