An Extension of the Traditional Theory of Customer Discrimination: Customers Versus Customers

This study provides an extension on the traditional theory of customer discrimination. The traditional theory looks at customer discrimination via a case in which customers discriminate against a certain type of employee. This paper considers a case of customer discrimination in which customers discriminate against another group of customers. This paper argues that if women choose to attend an all‐women college, they are engaging in this previously unexamined form of customer discrimination. Economic theory predicts that firms catering to customers who discriminate will charge higher prices. Thus, this study tests for the existence of customer discrimination by estimating a tuition equation at women's colleges and coeducational schools using ordinary least squares and a dummy‐interaction technique. This study finds that, all else held constant, women's colleges do charge higher tuition rates.