In supply chain management, what is the practice whereby a firm charges differential prices to maximize profits?

Understand the Problem

The question is asking about a specific pricing strategy used in supply chain management, where a firm sets different prices for the same product or service to optimize its profit margins.

More Information

Price discrimination allows firms to charge different prices to different groups of consumers for the same product, leveraging varying price elasticity of demand across those groups to maximize profits.

Tips

A common mistake is confusing this practice with general dynamic pricing, but price discrimination specifically involves charging different prices to different groups without significant cost differences.

Sources

• Chapter 11 Flashcards by Amy Horton - Brainscape - brainscape.com
• What Is Price Discrimination, and How Does It Work? - Investopedia - investopedia.com