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Price Discrimination

Price Discrimination. Priscilla Rodriguez Economics 521 Feb. 19, 2007. What is Price Discrimination?. Nonuniform pricing Charging consumers different prices for the same product Consumer surplus Deadweight loss. Successful Price Discrimination. Market power Differ in price sensitivity

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Price Discrimination

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  1. Price Discrimination Priscilla Rodriguez Economics 521 Feb. 19, 2007

  2. What is Price Discrimination? • Nonuniform pricing • Charging consumers different prices for the same product • Consumer surplus • Deadweight loss

  3. Successful Price Discrimination • Market power • Differ in price sensitivity • Prevent or limit resale • Example: Movie Theaters

  4. 3 Types of Price Discrimination • Perfect price discrimination • First degree • Requires perfect information • Example: Private Schools • Quantity discrimination • Second degree • Charges consumers more for the first unit than for consecutive units • Example: Staples • Multimarket price discrimination • Third degree • Divides consumers into groups and charges each group a different price • Example: Airlines

  5. Other Types of Price Discrimination • Two-part tariffs • Second degree • Charges consumers a lump fee (first tariff) for the right to buy goods • Example: Costo & Sam’s Club • Tie-in sales • Second degree • Required purchase • Bundled • Example: Grocery stores & Nivea

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