Question

In your opinion, which price discrimination is acceptable in the market? Justify your answer.

Answer 1

Answer : Price discrimination means the monopoly seller sells the same product at different prices to different consumers. Professor Pigou introduced three types of price discrimination in economics. These are

(I) First degree price discrimination : In this price discrimination seller sells the each unit of same product at different prices to different consumers. Here price discrimination leaves no consumer surplus.

(II) Second degree price discrimination : In this price discrimination the seller divide his buyers into two different groups and charge different prices according to the lowest demand price level of each group.

(III) Third degree price discrimination : In this price discrimination seller divide his buyers into two or more sub-markets with different price level which is based on output sold and demand condition in sub-markets.

According to my opinion , the third degree price discrimination is acceptable in market. Because in third degree price discrimination sellers sells their products in different sub-markets at different price level but in each market the price level is same for all buyers. This is a fair condition to all buyers and there is no chance to occur violence in the market. On the other hand , the first degree and second degree price discrimination sellers charges different prices to different customers in the same market which is unfair to buyers and there may be chance to occur violence in the market and hence this two price discrimination is not acceptable in the market, according to my opinion.