T5 - Price Discrimination ** Flashcards
What is 1st degree PD
Charging max price consumers are willing to pay
2nd degree price disc
Charging diff price dependent on quantity or choice
3rd Degree price descrimination
Charging diff prices to diff demographics
Examples
Market haggling
Mobile contracts
Tax fare at peak times
Cinema ticket prices
Hairdresser prices
Educational Bursaries
What do different price elasticities of demand cause
Varied prices
What are some barriers to prevent firms switching suppliers
Selling products and unique moments of times
What is price seepage
Consumers buyign at lower prices and selling at a low price in different submarketss
What must different segments have
Different PEDs
Why is a firm able to capture all available consumer surplus
By selling maximum prices for each unit possible
Is first degree price discrimiantion common
No, it is rare
First degree price disc features
Firms benefit increase in profits
Does not to reduce price of all untis sold to icn sale
Suppliers need to anticipate what consuemrs are willing to pay
Sellers would need to spserate markets and reach deals with indivuda lcustoemrs
Second degree features
Selling in quantities
Getting rid of excess when demand is low
Peak/off peak
Without discrimiantion what would total revenue be
Lower
Examples of 2nd degree price disc
Lower unti cost for higher quantity
Phoen deals whcih give x free texrs
Initally untis of electricity are set at a tariff
Examples of 3rd degree
Student discounts on trains
Discounts for buying train tickets
Discounts for travelling off peak
Benefits of PD
Firms can fofer service that would be unprofitable
Soem groups beneift from cheaper prices
Spreads demand and avodis conegstion
Increased investment from profit
Cons
Soem peopel may pay higher
Declien in consumer surplus
Potentially unfair
Admisntratiev costs
Adv of PD - Business
Profit maxamisation
EoS
Efficent use of infrastructure
Better use of space
Adv of PD - Consumers
Possibility of lower prices
Benefits some groups
Enables flexibility
Generation of postitve externalities
Dis adv of PD
Exploitation of captive markets
Limitations
What are captive markets
markets where the potential consumers face a severely limited number of competitive suppliers;
Meaning of limitations in disadvantages
The ability to PD may be limited as teh conditons neccessary are not fully met,limits on the extent in whcih diff prices can be applied
