When price discrimination is effective, cost is NOT a major factor in setting prices.

Question

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Price discrimination involves charging different prices for the same product or service to different customers. In this strategy, the seller focuses on customer demographics, market segments, and other factors to determine different prices for different buyers. The goal of price discrimination is to increase profits by capturing more consumer surplus from those who are willing to pay a higher price, while still making sales to those who are price-sensitive. Therefore, when price discrimination is effective, cost is not a major factor in setting prices because the seller is not necessarily seeking to recover costs on each unit sold, but rather trying to maximize overall profits by charging different prices to different customers.

When Price Discrimination Is Effective, Cost Is NOT a Major