To Discriminate You Need to Separate

Price discrimination — charging different prices for the same product or service — requires preventing people who pay a high price for an item from being able to buy it at a low price.

This is done by separating the markets — linking the price to different times when the item is bought, such as day or night, weekday or weekend; or different ages of customers; or other ways.

Another market separation gimmick is underscored by a squib in the latest Consumer Reports. Dr. Leonard’s catalog sells the Barber Magic hair trimmer for $12.99, but in the same catalog offers the identical product, called the Trim-a-Pet, for $7.99.

Other than the names on the packages and a bit of different description, the products are identical; and even the styles of the packages are identical.

Putting advertisements for both packages in the same catalog is a poor way of creating market separation: If I had hair and needed to cut it, I would simply buy the Trim-a-Pet for my personal use and save the $5.

This attempt at market separation might work if done in stores — pet stores could sell the Trim-a-Pet at lower prices than drug or hair-care shops sell the Barber Magic — but without some kind of geographic separation, successful price discrimination can’t occur.