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Predatory, First, Second, and Third degree Discrimination

First, let us start with a similarity between 'Predatory Pricing' and 'Price Discrimination . More specifically, predatory pricing and first degree price discrimination: both of these methods of pricing belong to a monopolistic business. Predatory pricing is the lowering of prices by a company specifically to put rival firms out of business. By eliminating the competition, the company edges closer to becoming a monopoly. At which point, the business can exercise first degree price discrimination. Both of these methods are illegal in most countries around the world, except when a natural monopoly exists. In the UK there is a board of scrutineers that monitor natural monopolies, such as water suppliers and electricity providers.

It is in the edging away from illegality that a business using a price discrimination method fabricates its good intentions and takes advantage of an hegemony of blind social acceptability, sometimes they do this with an arrogant attitude of moralistic virtue. This is borne out by fooling the unwary shopper, who is focusing exclusively on saving money because they have a tight food budget, into believing that the shop they are in, provides good value products.

Second degree price discrimination is when customers are given a discount for buying in bulk, compared to buying only single items. The business benefits from economies of scale. The offer of 'Buy one get one free' is an example of second degree price discrimination given to, usually FMCG, customers.

Peak-time fares is another example of second degree price discrimination. Many commuters on a train may readily agree with a price hike on their fare, such as a 'peak time' fare, if it keeps the 'riff-raff' day tripper tourist off 'their' train and out of 'their' space. Yet, there is no kindly intention towards the commuter from the train service provider; immediately following the 'peak-time' period the next train has a higher fare than the one after that, in the form of a gradation of prices. So, the rail traveller who is not a commuter, yet needs to arrive at a destination, such as an airport for a flight to a marvelous holiday destination, must pay a higher fee to travel with the silent commuter. "Good luck with having a conversation with THEM, you deliriously happy people who are forced to travel with miserable people, slumped in a downward spiral of ovine boredom"; and you're paying a premium for it too!

And the worst of all, is third degree price discrimination - discounts given to people who have either a particular social position (students, who are supposedly clever, poor people) or the elderly. We should bear in mind that discounts given to the elderly, as can be found in the UK's fish and chip shops as 'OAP (old age pensioner) prices', are 'sailing close to the shore on a leeward wind' when assuming that elderly people are necessarily invalids and cannot, or do not work, or receive a handsome pension. In the UK, there are strong laws that encompass age discrimination, particularly when applied to employment ¹.

So far then, there is little ethical difference between predatory pricing and price discrimination. However, we only have to combine the words 'predatory' and 'discrimination' in a sentence to see a semblance of connectivity. A predatory creature engages in discrimination when choosing which prey to feed on.

The clear difference then is that predatory pricing is illegal, but is difficult to prove if a business says it is setting 'competitive' pricing which may utilise second and third degree discrimination, whereas price discrimination could be illegal, but generally isn't, if it is not used with an intention to destroy competitors to such an extent as to create a monopolistic entity which intends to later become a 'price-maker' in its chosen market.

Predatory pricing comes from a position of ill-intent, and price discrimination, comes from a position of no morals, but hides behind a shroud of good intention which is really market-driven. In the case of the 'peak-time' rail traveller, they don't really have a lot of choice except to use a train to get to work (close to the existence of a monopoly); and in the case of the student and OAP discounts (an example of third-degree price discrimination) a push-marketing strategy exists in that the fish and chip shop, in the earlier example, wants to draw in more customers because the supply is already there (raw potatoes and fish, and oil that is already heated and therefore has no further cost applied to it).

We are all horrified by the crassness of a business when an announcement is made by that business that any third degree price discrimination they utilise is in the guise, and part, of their Corporate Social Responsibility – cheap fish and chips for captive elderly people who find it difficult to travel elsewhere for fast-food.