Question

As an alternative to uniform pricing a monopolist may engage in price discrimination. There are three general forms. Describe each form of price discrimination and provide a real-world example of each.

Answer 1

Answer : In general sense price discrimination means charging different price from different consumers. There are three different forms of price discrimination are:

• First degree price discrimination : It means monopolistic is aware of charging maximum price each consumer will pay for particular quantity. Here monopolistic go away entire consumer surplus. Example : Car dealership , sports car owner charged maximum price from the consumer.
• Second degree price discrimination : It means monopolistic covered a part of consumer surplus. This degree has been applied where there are large number of consumer in the market and have different tastes and preference . Example : Electricity unit are charged according to consumed, Bulk discount coupons etc.
• Third degree price discrimination : It means here the seller divided the buyer into two or more segment and treated each of them separately. They charged different. Price from different consumer. Example: Age group, segment according to geographical area.