Question

Consider Second-Degree and Third-Degree Price Discrimination practiced by firms. Compare and contrast these practices providing real world examples.

Answer 1

Second-degree price discrimination is a practice by firms in which the price varies according to the quantity purchased. It means that the firm provides a discount for bulk purchases that involve large quantities. On the other hand, in the case of third-degree price discrimination, the firm creates consumer groups and charges a different price to each group.

Example fo second-degree price discrimination include the payment for electricity. The electricity bills usually involve block pricing where the price differs for each block. Example of third-degree price discrimination is a move theater charging different price to students and others by giving student discounts etc.