- A.Continuously adjusting price based on demand, supply, time, customer, or competitor signals — common in airlines, hotels, ride-sharing.
- B.Charging different prices to different customers for essentially the same product, based on willingness-to-pay — increases total revenue when customer segments have different price sensitivities. ✓
- C.Setting price by adding a standard markup to product cost — simple but ignores customer willingness to pay and competitor prices.
- D.Charging different prices to different customers for essentially the same product, based on willingness-to-pay — increases total revenue when customer segments have different price sensitivities.
Price Discrimination is charging different prices to different customers for essentially the same product, based on willingness-to-pay — increases total revenue when customer segments have different price sensitivities. The other options describe related but distinct concepts in Pricing — see the deep-dive guide for the full distinction.
How to think about questions like this
Captures revenue across the full willingness-to-pay distribution. Questions like this test whether you can distinguish Price Discrimination from neighboring concepts. The most common trap is choosing a closely-related concept that sounds similar but applies in a different context.
When you see a definition question on an exam, do two things: (1) translate the question into your own words, then (2) generate the answer in your own words before reading the options. This avoids the cognitive bias of recognizing a familiar phrase as correct just because it is familiar.