What is a discriminatory monopoly?

Discriminating monopoly is a situation where the main company on the market offers different types of prices to different customers. The reasons for this type of price discrimination will often vary, but usually relate to the maintenance of a market share within certain demographic clients that are considered desirable or as a means of entering and growing clients at a completely new market. This discriminatory monopoly method usually involves structuring marketing and sales campaigns that are used to create demand for goods and services at certain price levels, and then gradually increases these prices as soon as the demand is fixed.

One of the simplest ways to understand how discriminating a monopoly function is to consider a hotel chain that is considered to be the most successful in hospitality. When opening a new hotel, the company can decide to offer special price packages in the first few months of operations. This may include special rates for certain days nEBO discounted packages of rates for extended weekend stays. Using this strategy will create demand for reservations and over time guests enjoy the equipment sufficiently to book the same hotel for subsequent visits. After the hotel is firmly established and the demand is consistent, special rates are offered less often, even if demand remains at an acceptable level.

The general idea of ​​a discriminatory monopoly can be used in almost any industry. Telecommunications providers can offer special prices for a limited period of time to create additional demand and secure contracts that provide permanent revenue stream for several years. Airlines often use this approach to fill a certain number of seats when announced new flights, and return to standard prices as the actual flight date is.Over time in previously unused markets and over time, building customer loyalty, which allows you to maintain these customers, even if some of the special stores have expired.

While the idea of ​​a discriminatory monopoly is to create the demand that over time it leads to a solid customer base, with this approach there is a certain risk. For some clients, they will focus strictly on savings. As soon as these savings have decreased, these consumers will turn attention to competitors who offer excellent prices. If the company cannot offer something in the way of solid services, desired functions or some other equipment that would attract the consumer's attention, the revenues generated from the use of this approach may be lower than originally expected.