Dual pricing is a situation in which the same product or service is sold at different prices in different markets. There are a number of reasons why dual pricing may be employed, including the following:
- An aggressive competitor may use dual pricing to drastically lower its price in a new market. The intent is to drive out other competitors and then raise its prices once the other parties are no longer selling in the market. This practice can be illegal.
- There may be financial and tax reasons for pricing differently. For example, adverse currency exchange rates or currency retention requirements may make it more difficult to sell into a market, so the seller must raise prices to offset these costs of doing business.
- Distribution costs may be different in each market. For example, distributors must be used in one market, while sales can be direct to consumers in another market. Each distribution variation results in different margins, unless prices are altered to generate a uniform margin in all markets.
- Prices may be demand-based. Thus, an airline can offer one price to an early-booking customer and a higher price to someone attempting to buy a seat at the last minute.