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Sellers like this as the discount granted is not just "given for free" and makes future price/value negotiations easier.

Buyers have the advantage of getting some value for something no longer used. These are price reductions given for bulk purchasing.

Many are price discrimination methods that allow the seller to capture some of the consumer surplus.

The most common types of discounts and allowances are listed below.

Examples of these functions are warehousing and shelf stocking.

Trade discounts are often combined to include a series of functions, for example 20/12/5 could indicate a 20% discount for warehousing the product, an additional 12% discount for shipping the product, and an additional 5% discount for keeping the shelves stocked.

The expectation is that they will impose an implied switching cost and thereby bond the purchaser to the seller.These are price reductions based on the quantity of a single order.The expectation is that they will encourage larger orders, thus reducing billing, order filling, shipping, and sales personnel expenses.A seller supplying both trade or resellers, and the general public will have a general list price for anybody, and will offer a trade discount to bona-fide trade customers.Trade-in credit, also called trade-up credit, is a discount or credit granted for the return of something.

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