Discriminatory Pricing

Universities use this all the time.  What is it?  It’s a common business pricing technique.  Suppose you have a lemonade stand.  You determine the optimum price to charge by computing the price that will maximize your profit.  (You use Calculus, of course!)  After you determine that price (say $50 a glass), you realize that you could sell lemonade to some people (who won’t pay $50)  for $40 a glass and still make a profit, but, you don’t want to lower your sticker price because if you sold all your lemonade at $40 a glass, you wouldn’t make as much total profit.  How do you capture that $40 a glass purchaser?  You figure out a way to give them a discount.  It would be even easier to find them if you could get them to tell you their earnings.  In other words, you offer them something special, without lowering your price.  And you don’t let the $50 a glass buyers know that you are willing to lower your price.  You say something like, “Oh, they were thirsty and didn’t have the $50, so I gave them some financial aid.  I am a good guy, of course.  I want everyone to get lemonade.”

I’m not saying that financial aid is bad.  I’m justing making you aware that, in many cases, its just a way of increasing total revenues for the university.

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