Question

1. As manager, you have decided that it’s time for some price discrimination to benefit your firm. There are typically three different “degrees” of price discrimination to choose from. Describe each “degree” of price discrimination, and then explain the specific “degree” you would use that has the greatest applicability to a range of goods that consumers typically purchase from your firm.

Again, no hedging your bet. :-) Select only one specific degree. Do not select more than one degree or combinations of degrees.

Answer 1

The three kinds of price discrimination that we can use are:

1st degree: Under First degree PD when we want to capture the entire consumer surplus of the consumers who are willing to purchase the good.

It is mainly used by lawyers and doctors who charge in full amount.

2nd degree:

In this they are charged a different price for different goods consumed. They charge different price to different consumers based on the reservation price of the lower buyer.

Eg. Amusement parks, telephone vouchers.

3rd Degree:

In this method we are using different prices for different segments of population. Also, they have membership for the group. This is used to give discounts.

eg: meal discounts for college and work professionals.