Question

Economist Reuben Kessel wrote an influential article in 1958 analyzing price discrimination by medical care providers. Kessel interviewed several doctors and dentists in Los Angeles, and found that these providers often provided fee-for-service treatment to traveling business professionals but charged each patient a different amount. These health care providers told Kessel they had their receptionists see the make of car the individual was driving when determining the fee (along with other information the provider gleaned about the client). Assume this information revealed eachclient's willingness to pay. This is an example of ________.

A) first-degree price discrimination

B) second-degree price discrimination

C) third-degree price discrimination

D) simple monopoly pricing

Answer 1

First degree price discrimination

First degree price discrimination refers to the practice by a seller of charging different maximum prices from the different consumers for the same good or service according to the buyers willingness to pay. In first degree price discrimination different price is charged on the basis of consumers willingness to pay.  Here the doctors charges the maximum price according to the client's willingness to pay. So this is an example of first degree price discrimination.