Price discrimintition occurs when a company:
refuses to sell its product to certain customers based on some distinguishing factor such as race or religion.
produces different versions of its product.
buys a given input from several sellers and pays a different price to each seller.
charges different prices to different customers who are all buying the same product.

Price discrimination happens in a variety of industries, often where businesses have some market power, such as airlines and movie theaters. For example, airlines might charge different fares based on how far in advance a ticket is purchased, aiming to maximize revenue from both bargain hunters and business travelers willing to pay more for last-minute flights. This strategy not only helps optimize sales but also fills more seats.

An important tip when examining price discrimination is to look out for the common mistake of assuming it always harms customers. In fact, it can benefit consumers by allowing businesses to serve different customer segments. For instance, student discounts or senior citizen rates make products and services more accessible, reflecting a nuanced understanding of consumer needs and financial situations.