Ch7 : Price Discrimination

Question 1

What are the 3 types of price discrimination?

Answer 1

1st degree PD ( perfect discrimination )
2nd degree PD ( implicit market segmentation )
3rd degree PD ( explicit market segmentation )

Question 2

What does PD means ?

Answer 2

Price discrimination means that different consumers are paying different prices for the same good or service for reasons not associated with the costs of production.

Question 3

What are the 3 conditions necessary for PD

Answer 3

1. The firm needs to have information about customers
2. The firm must have market power
3. Customer’s and inability to resale the good

Question 4

Coupons found on the internet is an exemple of which PD?

Answer 4

2nd degree PD

Question 5

Children’s menu at St-Hubert is an exemple of which PD?

Answer 5

3rd degree PD

Question 6

Used car sales at a dealership is an exemple of which PD?

Answer 6

1st degree PD

Question 7

Which PD correspond to this:
The monopolist charges each consumer a price that corresponds as closely as possible to the consumer’s valuation for the good

Answer 7

1st degree PD

Question 8

By choosing which PD, the firm captures the entire consumer surplus ?

Answer 8

1st degree PD

Question 9

What are examples of 1st degree PD?

Answer 9

Car dealers
Auctions
Sales in flea markets

Question 10

Which PD correspond to :
The monopolist charges different prices depending upon the some non observable characteristics

Answer 10

2nd degree PD

Question 11

Which PD correspond to :
The firm offers a menu of different options to screen different types of consumers according to their valuations

Answer 11

2nd degree PD

Question 12

Which PD correspond to :
Segmentation is obtained through the choices the consumers make (customers self-select)

Answer 12

2nd degree PD

Question 13

What are examples of 2nd degree PD?

Answer 13

Cell phone plans
Netflix plans
Menus un restaurant
Season tickets
Pricing of airplanes

Question 14

Which PD correspond to :
Consumers can be differentiated according to observable characteristics

Answer 14

3rd degree PD

Question 15

Which PD correspond to :
Logic : if the demand curves differ across different market segments, it is profitable to charge different prices taking into account those differences

Answer 15

3rd degree PD

Question 16

What are examples of 3rd degree PD

Answer 16

Rebates or lower prices for
- students
- kids
- seniors

Different prices for women and men

Geographic price discrimination (different valuation ?

Question 17

What is the equation for the revenue ?

Answer 17

R = P x Q