In the business world, price discrimination can be detrimental to small businesses trying to compete with larger organizations pricing. In the 1930s congress was worried about large multimarket firms using predatory marketing techniques in certain markets to bankrupt smaller firms in the area. In response, Congress enacted the Robinson-Patman act which prohibits larger forms conducting pricing strategies that contribute towards becoming a monopoly by getting rid of their rivals, the smaller family owned stores. With this measure in place the smaller mom and pop stores are better protected from the larger chains and can help to contribute more to the local economy. A downside of the act from a consumer standpoint is that the larger chain firm can provide lower cost for equal services and products. There were several legal cases involved with the Robinson-Patman act disputing both sides of the price discrimination issue. In the case the Federal Trade Commission vs. Morton Salt, the FTC thought that the ability for the larger businesses to buy much more from wholesale producers such as Morton Salt, especially when Morton Salt had special discounts for firms that bought more product. The smaller firms could not compete and the commissioner found that it was monopolistic behaviour and put a stop to it. Another issue of ethics that presides in the study of price discrimination is that companies like morton salt are not very or at all transparent about the reasoning behind certain price discriminations. Companies do not actively state why certain products or services are more expensive for some customers and not others. In the journal article “The ethics of Price Discrimination” the authour Juan M. Elegido describes a common scenario in...
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... company is researching and developing a drug to be introduced to the public, that company usually spends millions and millions of dollars trying to get it working correctly and approved for use. Because of this, pharmaceutical companies tend to price their products way above the margin of revenue to ensure a return. This is when price discrimination kicks in though, as certain demographics are targeted, such as older people, and the price for these individuals is even higher than for others because the companies know how much these individuals need certain medicines and that they are willing to pay top dollar for these products. This is unethical regardless of research costs, if this is the way they have to ensure profits, these pharmaceutical companies should be looking into ways into lessening the costs of development instead of passing those costs onto customers.
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