Manufacturers use dual prices mostly in different countries having different currencies. The objective of dual pricing can be to enter a new market with one’s product by offering low prices in a foreign country. Generally, dual pricing is not termed as an illegal process, but if it is done with the intention of dumping it can be considered illegal.
It can be defined as the selling of same or identical product for different prices in different markets. Dual pricing can be perceived as illegal by some people but it is a legitimate pricing option. However there are industry specific laws that need to be followed. While using Dual Pricing strategy companies must ensure that there is no scope for arbitrage. It is very important else the middlemen/brokers will get an opportunity to make eas y money by destroying one particular market for the company. It is also known as two-tier pricing. It is common practice in many developing nations which have a strong emphasis on the tourism industry. In this scheme, the local citizens are offered lower prices whereas the foreigners are required to pay higher prices. For Example – The ticket for visiting Taj Mahal – one of the seven wonders of world, located in Agra, is different for Indian citizens and different for foreign visitors.
A lot of companies make good use of dual pricing by offering same product at different prices to their local customers as well. They use the different prices at different time for same product. Let us look at an example to understand how companies use dual pricing strategy to their advantage.
AIRLINE Industry is a prime example of Dual Pricing. Companies offer lower prices if you book your flight tickets well in advance. The demand of this category of customers is elastic and varies inversely with price. As the time passes the flight fares start increasing exponentially to get high prices from the customers whose demands are inelastic. This is how companies charge different fare for the same flight tickets. The differentiating factor here is the time of booking and not nationality or any other factor.