Question

Define price discrimination. Explain the difference between first-degree and third-degree price discrimination with two examples of each. Your answer will not be complete without two examples of each.

Provide your answer here. DO NOT TRY TO COPY/PASTE YOUR ANSWER.

Answer 1

Ans:-Since a monopolist can fix the price of his product,it is possible that he may find it profitable not to charge a uniform price for his entire output but sell it at varying prices.The term used to denote this phenomenon is 'price discrimination'.Price discrimination is the absence of a policy of uniform price for the entire output.Instead, the monopolist sells portion of it at two or more prices .And this happen even when the product is homogeneous and one unit of it cannot be distinguished from the other.

First degree price discrimination:-The monopolist may charge a seperate price for each unit sold by him.This is known as the first degree price discrimination.Example:-Sales by car dealers,Sale of ICC Cricket event tickets

Third degree price discrimination:-The monopolist may split up the market for his product on the basis of the buyer ,he may devide buyers in to two or more categories and charge from each category a different price.This is known as price discrimination of third degree.Example:-Airplane tickets sales for different class of consumers,Movie theatre charges