T5 - Price Discrimination 2.0 Flashcards
what is price discrimination
when firms sell the same good to different groups of consumers for different prices
what is first degree price discirmination
charging the max price consumers are willing and able to pay
what is second degree price discrimination
different prices based on quantity or chocies
what si third degree price discrimianton
diff prices for different segments of the market
examples of different demographics in 3rd degree price disc
age
incoem group
time of use
conditions neccessary for price discrimiantion
price making ability
ifnormation to seprate the market (diff peds)
be able to prevent reseale and seperate the market
low admin too seperate the market
what is proper term for resale into sup markets
price seepage
are there any differences in costs of production for price discrimiantion
no
how cna firms haev price setting ability
monopoly power
with regards to ifnoramtion what must firms haev it on
be abel to sepertae teh arket into diferents price elasticicties of demand
what happens with consuemr surplus in first degree price disc
all of consumer surplsu turned to monopoly profit
examples of second degree price discrimination
loyalty cards for frequent buyers
colelction fo coupons from maagazines
eneergy is cheaper after high qty of units boughts
why may 2nd degree pd be called indirect pd
as consuemrs have a chocie as to the price they are paying
why are soem chocies cheaper in 2nd degree pd
as they impose costs to consumers
exampels of costs imposed on consumers in 2nd dgeree
buying in bulk
unsociable hours
collecting coupons
when does 3rd degree price discrimination occur
when a firm is abel to segement the market into different peds
econ dal cons of pd
alloactive innefficiny
inequality
anti comeptitive pricig
econ dal pros of pd
dynamic effienc
economies of scale
soem poeple benefit
cross subsidisation of proft
ahmad pros of pd to the firm
firms offer unprofitabel srvices
spread demand
avoid congenstion
inc profit
eco of scale
effinecint use of infrastructure
better use of space
how si better use of spcae a pro of pd for firms
able to clear execss supply and existign stocks quickly to cater and stock newer shit thtas in demand
how is effecient use of infrasrtcuture a pro to firms
those with high fixed costs gernally have minimal mc , so the cost to add oen more consumer isnt much menaign they can turn that added revenue into profit or cover new costs
cons of price discrimiantion firms mr ahmad
admin costs
mr ahamds adv of prd
beenfits to soem groups
enables felxibility
geenates psotiiev externalities
how does pd enabel flxibility for xonusmers
consuemrs are abel to match pruchasign and shopping to them
exampels of flxibility in pd
elderly peopel beenfitign from early bird prices
exampels of hwo pd gens psotitive externalties
say private schools offerign discoutned priced places to those who cnanot afford it
disadvantages of pd to consuemrs
exploitation fo captive markets
fall in consumer suprlus
unfair
examples of explotiation fo captive markets for ernergy prices
where esxistign customers pay higher prices whic subsidises discoutns for new consumers
limtiations of pd
the condtions to be abel to price discrimiante may nto eb fully met , meanign there is a limit to the extent to whcih diff rpices can be set
draw backs of frist degree pd
time consumign
difficutl to do for most businesses
what must companies be abel to do to avoid elimiantion fo profits
avoid resale
how does spread demand help firms in pd
as pd encorages peopel to travel at unpopular times say, meanign early in mronign, so not too many peopel in palce at once
how can markets be kept seprate in pd
by time
physical distance
nature of use
why cna price disc be costsly
as tryign to seprate the market means mroe enforcement and shit that they are kept serpate
ie added proccesses to identify tickets to consuemrs, or extra inspectors to chekc such things
how can price seepage and resale be prevented
benefits of 1st degree
profit and max producer surplus
what isnt needed to be doen for first degree pd
reduce the price of all units sold to increase sales
issues with first degree
seller would need to seeprate maret for individual deals
sellers would have to anticipate what customers would eb willing to pay
types of second degree
bulk selling offers
last minute tickets for certian products
gettign rid of excess when lwo demand
peak adn off peak sales
what situation woudl first degree pd be used
buyign a car
when may 3rd degree pd be seen
studnets and pensioner discounts
booking in advance
easiest way to knwowhat firms are doign 3rd degree pd on
look at teh good
look at who consumes it
look at why it may be inealstci demadn on it
look at why elastic demand
boom
what is main exampel fo 2nd degree
bulk offers
2 for 1 offers
coupons
loaylt cards
howa re loyalty cards a form of secodn degree pd
as more consuemrs buy they may end up gettign the next product free ro at a high discount
how can price discirmiantion act as a bte
firms that can afford may offer better discoutns, lwoer prices, capturign greater market share
ways to prevent resale
id on tickets
software businesses requiring school emails
students showign id cards
