Which of the following is not an example of price discrimination?

Which of the following is not an example of price discrimination?

A. Differences in haircuts for males and females

B. Differences in auto insurance rates

C. Senior citizen discounts

D. Charging the same price for a letter delivered anywhere in the U.S.

Answer: D. Charging the same price for a letter delivered anywhere in the U.S.

Price discrimination can be defined as a charge of different prices for the same product or service to varied customers or groups of customers. It sometimes entails dividing the market and pricing products higher for consumers with high WTP or capacity for payment and pricing products lower for those with low sensitivity to price changes.

Amongst the given choices, A, B, and C are examples of price discrimination. Price discrimination can be seen in the different hair-cut prices for male and female, different auto insurance premiums set according to the customers’ ages, genders, or regions, and senior citizen discounts where two people are charged two different prices for the same product or service.

However, option D, charging the same price for a letter delivered anywhere in the United States of America, is not an example of price discrimination. In this case, it is seen that the same price is charged for the service (letter delivery) irrespective of location or consumer characteristic which is against the principle of price discrimination where prices differ depending on consumer segment or characteristic.