Tuesday, March 24, 2009

3rd degree price discrimination at Humayun's Tomb in Delhi

In microeconomics, third degree price discrimination means that price of a good or service varies by location or by customer segment to extract surplus according to willingness or ability to pay.

As an example, tonight in Delhi we went to Humayun's Tomb.  The fee for locals Rs. 10 (20 cents).  The fee for "foreigners"?  Rs. 250!  $5 versus 20 cents!   25 to 1 is beyond discrimination, holy smokes.  

It felt unfair, but my best attempt to persuade the security guard I was Indian failed, so we decided to pay the fee.  It was well worth it - it's an amazing site.  Still, the 25:1 ratio left sort of a bad taste.  I kind of wish they just charged nothing for locals.  Always a lesson to keep in mind when doing price discrimination - you don't want to leave your customers feeling like they got a raw deal.  

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