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ce discriminating due to the level of income earners in a specific area. Linking with the title; not only is Woolworth’s price discriminating by the level of incomes of the consumers but with the geographical location of the specific groups of consumers. Surrey hills is in the area of the city, where prices of goods and services are relatively more expensive, therefore Woolworths taking advantage of its economic capabilities to charge higher prices in this particular area, regardless of competition. Throughout the other states of Australia such as Perth and Brisbane, the same situation is occurring. Under the charts are the tables showing the prices of the goods that were noted. Evidently it shows the difference in prices in the areas of the data gathered, the significance of this was again to raise the evidence, showing by how much Woolworths was price discriminating on the products.

 

Coles is in the same situation as Woolworths, as the evidence shows that Coles is also price discriminating due to the consumer incomes and geographical location of stores. But for Coles the prices are higher and closely similar as for Woolworths there was a distinguishable price difference. Looking at figures 5 to 6 in appendices (Coles product prices) there is no significant change in the prices they are discriminating on.

 

Comparing the data’s of Woolworths and Coles, we see a massive price difference of the two stores. Calculating the average prices of all three states, it was discovered on Figures 7 and 8 in appendices that Woolworths had a high difference in their store prices than Coles did, but Woolworth’s prices were lower than that of Cole’s store prices. Reason for this could be that since consumers have other choices of shopping at other supermarkets preferably small ones. Woolworths has lower prices to keep out smaller competitors whom try to enter the market but cannot because matching the lower prices of Woolworths means they are paying higher production costs for little profit, they cannot sustain this so they generate loss rather than gain profit.

 

The reason for the high prices for Coles could be due to the fact, that the area the store is located lacks other supermarket competition so therefore consumers are forced to shop at Coles if in that district.

 

This type of Price discriminating of what Woolworths and Coles are using is referred to as third degree price discrimination. This form of price discrimination is the most frequently used among firms with economical power in the market. The key for third degree price discrimination is associated directly to the consumer’s willingness and ability to pay for the good or service. It means that the prices that are charged by the firm may bear little or no relation to the cost of production.

 

This graph is an example of third price discriminating

 

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