Ch7 : Price Discrimination Flashcards
What are the 3 types of price discrimination?
1st degree PD ( perfect discrimination )
2nd degree PD ( implicit market segmentation )
3rd degree PD ( explicit market segmentation )
What does PD means ?
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.
What are the 3 conditions necessary for PD
- The firm needs to have information about customers
- The firm must have market power
- Customer’s and inability to resale the good
Coupons found on the internet is an exemple of which PD?
2nd degree PD
Children’s menu at St-Hubert is an exemple of which PD?
3rd degree PD
Used car sales at a dealership is an exemple of which PD?
1st degree PD
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
1st degree PD
By choosing which PD, the firm captures the entire consumer surplus ?
1st degree PD
What are examples of 1st degree PD?
Car dealers
Auctions
Sales in flea markets
Which PD correspond to :
The monopolist charges different prices depending upon the some non observable characteristics
2nd degree PD
Which PD correspond to :
The firm offers a menu of different options to screen different types of consumers according to their valuations
2nd degree PD
Which PD correspond to :
Segmentation is obtained through the choices the consumers make (customers self-select)
2nd degree PD
What are examples of 2nd degree PD?
Cell phone plans
Netflix plans
Menus un restaurant
Season tickets
Pricing of airplanes
Which PD correspond to :
Consumers can be differentiated according to observable characteristics
3rd degree PD
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
3rd degree PD
