to pay more for the same good than other consumers are. In this second
situation, if the firm is able to determine which consumers are prepared
to pay a high price and which are prepared to pay only a low price, the
firm is able to segment the market.
The Internet and online shopping have provided firms with access to
huge amounts of information about consumers’ buying habits. Firms can
now collect data on who visits their websites, what products they look at,
and which combinations of products are often purchased together.
Analysis of these data allows firms to know much more about consumers’
preferences, much more quickly, than was true even 10 years ago. Not
surprisingly, perhaps, the Internet has facilitated firms’ ability to price
discriminate.
In markets like this in which bargaining takes place, the sellers tend to be
very good at determining each consumer’s genuine willingness to pay. As
a result, different consumers end up paying different prices for the same
products. This is effective price discrimination.