Rate Discrimination

Rate discrimination is a pricing strategy where a seller charges different prices to different customers for the same product or service based on their willingness or ability to pay. This approach aims to maximize revenue by capturing more consumer surplus—wealth that consumers are willing to spend but might not have paid at a single, fixed price. Examples include student discounts, peak vs. off-peak ticket pricing, or personalized quotes. It requires identifying segments with different price sensitivities and is legitimate when based on observable, non-discriminatory factors.