What are the types of price discrimination?
Price Discrimination Homework Help is something that involves the charging of a different price with different groups or sets of people.
It is done in the case of the same good. The best example of this would be student discounts. There are other things like peak sale offers or fares.
There are a number of types that are seen in these price discriminations. They are:
First-degree price discrimination:
This is the case that would involve the charging of the consumers with the price at the maximum levels that they are ready to pay. In this case, you can see that there would be no surplus on the consumer side at all.
Second-degree price discrimination:
In this case, it is done according to the quantity that is being consumed by the people. For example, you can see that many mobile service providers provide you with call rates that are cheaper after the first five minutes of the call.
Third-degree price discrimination:
This would be the changes that are made in the prices according to the different groups that are involved. It would be the students, the travelers, and so on. According to the group that the person belongs to, the price would change.
The ideal conditions:
There are certain conditions under which this price discrimination usually functions. They can be put down as follows:
The first and foremost thing that would be needed would be imperfect competition. The firm must be in an imperfect competition to let this happen. It also must be a price maker which has a demand curve that is downward sloping.
The second thing that the firm would require is to segregate the markets and the already existing resale. For example, the firm must be able to stop an adult from using the child’s ticket.
There is a need for elasticity in the demand for the various consumer groups. In case there are students who fall into the low-income groups, they would be more price elastic than the rest.
Advantage:
There is an increase in revenue for the firms. It is able to sell goods even to those who would not get them at the normal rates, as they are giving offers now.
Disadvantage:
There are some consumers who would be paying more. It would not be the right thing from their perspective. There would be a decline that can be seen in the case of the surplus on the consumer side.
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