Provide an example of price discrimination and classify it as first-degree, second-degree or third-degree price discrimination.

Expert Solution

The first example of the price discrimination is the different car prices of the same model of the car at different dealer showrooms. Here, the discounts are offered to the customers on the basis of their paying capacity. It makes different prices to different customers for the same car model. It is the example of first degree price discrimination.

The second example of the price discrimination is different price per unit, for the different size of the products. Here, the price per unit of electricity will be less if the higher amount of electricity is used. Or, price per KG of washing powder will be less if there is a 5KG pack, in comparison to the 2 KG pack of washing powder. It is a case of second degree price discrimination.

The third example is charging different prices of one utility or product to the different types of consumers. For example, different electricity charges are applied to the industrial consumers, in comparison to the household consumers. It is a case of third degree price discrimination.

Rahul Sunny answered 2 years ago

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