What is referred to when different prices are charged based on variables like time or location?

The concept where different prices are charged based on variables such as time, location, or consumer characteristics is known as price discrimination. This pricing strategy allows businesses to maximize profits by charging based on consumers' willingness to pay, which can vary according to different factors. For example, services like airlines often charge different fares depending on when the ticket is purchased and the demand for seats at various times.

In price discrimination, the underlying principle is that consumers will pay different amounts for the same product or service, reflecting their varying levels of price sensitivity. This approach can be beneficial for businesses, as it enables them to capture consumer surplus and increase total revenue.

On the other hand, the other pricing strategies listed, like market skimming, promotional pricing, and penetration pricing, focus on different aspects of pricing strategy. Market skimming involves setting high initial prices for a new product before gradually lowering them, promotional pricing offers temporary discounts to drive sales, and penetration pricing sets low prices initially to attract customers and gain market share quickly. These approaches do not specifically address the variation in prices based on consumer characteristics or temporal and locational factors as effectively as price discrimination does.