Price discrimination is an elementary concept in microeconomics. The three degrees of price discrimination are the in effect versions of - suppliers selling goods or services at different prices. In addition to being Pareto efficient and partially a socially efficient model, price discrimination is the foundation of the 'two-sided market' that allows suppliers to remain in business. This strategy holds a lot of potential for both - social enterprises trying to operate sustain-ably and private firms operating trying to make a social contribution.
As the boundary between profit and non-profit is becoming blurry, a fourth sector has emerged. The strategies of two sided markets can develop into some interesting business models.
For example, an insurance company operates it's core business in North America or Europe. Supported by it's cash reserves and experience in insurance and risk management, it can venture into Africa with a micro-insurance low-or-no profit business model. Effectively, the market in North America or Europe subsidizes the consumers in Africa. In this way, the organization can be working towards it's social mission.
However, such a strategy becoming commonplace can cause policy-problems especially in the developed countries where the consumers might not want to subsidize the services to a far-away market.
On the other hand, it could make business sense for micro-finance firms like Grameen Bank to expand their business to the OECD countries as a full-scale financial organization. 'Economies of Scope' might also be very strong in such cases.
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| Courtesy: fourthsector,net |
As the boundary between profit and non-profit is becoming blurry, a fourth sector has emerged. The strategies of two sided markets can develop into some interesting business models.
For example, an insurance company operates it's core business in North America or Europe. Supported by it's cash reserves and experience in insurance and risk management, it can venture into Africa with a micro-insurance low-or-no profit business model. Effectively, the market in North America or Europe subsidizes the consumers in Africa. In this way, the organization can be working towards it's social mission.
However, such a strategy becoming commonplace can cause policy-problems especially in the developed countries where the consumers might not want to subsidize the services to a far-away market.
On the other hand, it could make business sense for micro-finance firms like Grameen Bank to expand their business to the OECD countries as a full-scale financial organization. 'Economies of Scope' might also be very strong in such cases.
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