Price discrimination is a pricing strategy where businesses charge different prices to different consumers for the same product or service, based on their willingness to pay. This approach can be observed in various real-world scenarios, illustrating how companies maximize their profits by catering to different market segments.

One common example is movie ticket pricing, where adults and children are charged different rates. Children typically have a more elastic demand because they rely on their parents for money, making them more sensitive to price changes. By offering lower prices for children, theaters can attract more families, thereby increasing overall attendance and profits. Additionally, matinee pricing targets off-peak hours, encouraging attendance during less busy times by offering reduced rates.

Airline ticket pricing also exemplifies price discrimination. Airlines often charge business travelers higher fares because their demand is less elastic; these travelers have a greater need to fly for work and are less likely to seek alternative options. In contrast, vacationers may be more price-sensitive and willing to shop around for cheaper tickets. To maintain profitability while offering lower prices to vacationers, airlines often impose restrictions, such as non-refundable tickets, which prevent reselling and ensure that the lower fare is locked in.

In the context of higher education, colleges often set high tuition rates that are primarily paid by middle and upper-class students who do not qualify for financial aid. This creates a tiered pricing structure where wealthier students pay full tuition, while financial aid allows lower-income students to access education at reduced rates. This practice raises ethical considerations regarding access to education and the financial burden on students.

Quantity discounts are another form of price discrimination, where businesses offer lower prices for additional units purchased. For instance, a "buy one, get one 50% off" deal capitalizes on the diminishing marginal utility consumers experience with each additional unit, encouraging them to buy more than they initially intended.

Discount coupons represent a strategic pricing tactic as well. Grocery stores often distribute coupons to attract price-sensitive customers who are willing to invest time in clipping coupons for savings. Those who do not engage in this practice end up paying higher prices, allowing stores to segment their market based on consumer behavior and willingness to pay.

Lastly, software companies frequently employ price discrimination by offering different versions of their products, such as student editions at lower prices compared to professional editions. This allows them to cater to varying consumer needs and financial capabilities while maximizing revenue from different market segments.

Understanding these examples of price discrimination helps illustrate how businesses strategically set prices to optimize their profits while addressing the diverse needs and behaviors of consumers.