The impact of price discrimination on tourism demand / Maria Fouché
The primary goal of this study was to determine the impact of price discriminationon tourism demand. Four objectives were defined with reference to the primaryresearch goal.The first objective was to analyse the concept of price discrimination and relevanttheories by means of a literature study. In this regard it was found that pricediscrimination between markets is fairly common and that it occurs if the samegoods were sold to different customers at different prices. Price discrimination isalso possible as soon as some monopoly power exists and it is feasible when it isimpossible or at least impractical for the buyers to trade among themselves.Three different kinds of price discrimination can be applied, namely first-degree,second-degree and third-degree price discrimination. The data also indicatedthat price discrimination is advantageous (it mainly increases profit) and that ithas several other effects too.The second objective was to analyse examples of price discrimination by meansof international case studies. In these different case studies it was found thatdemand and supply, therefore consumer and product, formed the basis of pricediscrimination. If demand did not exist, it would be impossible to apply pricediscrimination. The findings also indicated that, for an organisation to be able topractice price discrimination, the markets must be separated effectively and it willonly be successful if there is a significant difference in demand elasticity betweenthe different consumers. Furthermore, the ability to charge these different priceswill depend on the consumer's ability and willingness to pay. If an organisationshould decide to price discriminate, it would lead to a higher profit, a moreoptimal pricing policy and also to an increase in sales.The third objective was to analyse national case studies. This was done throughcomparing the data of a tourism organisation price discriminating (Mosetlha BushCamp, situated in the North West) to two organisations that did not implementprice discrimination (Kgalagadi Transfrontier Park in the Northern Cape andGolden Leopard Resort, also situated in the North West). It was found that acustomer with low price elasticity is less deterred by a higher price than acustomer with a high price elasticity of demand. As long as the customer's priceelasticity is less than one, it will be very advantageous to increase the price: theseller will in this case get more money for less goods. With the increase in pricethe price elasticity tends to rise above one.The fourth objective was to draw conclusions and make recommendations. Itwas concluded that price discrimination could be applied successfully in virtuallyany organisation or industry. Furthermore, price discrimination does not alwayshave a negative effect; but can have a positive ass well. It can have a positiveeffect on tourism demand. The findings emphasised that the main reason forimplementing price discrimination is to increase profit at the cost of reducingconsumer surplus. From the results it was recommended that more research onthis topic should be conducted.
Year of publication: |
2005
|
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Authors: | Fouche, Elizabeth Maria |
Subject: | Tourism | Tourist | Foreign tourist | Domestic tourist | Market | Industry | Monopoly | Perfect competition | Demand | Supply | Elasticity | Inflation | Exchange rate | Consumer price index | Consumer surplus | Pareto efficiency and price discrimination |
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