What are the key conditions that must be present for a firm to successfully price discriminate?...

What are the key conditions that must be present for a firm to successfully price discriminate? What are two different examples of price discrimination being practiced today?

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Price discrimination is the practice of charging different prices for the same goods and services. There are conditions which are required to be fulfilled for a firm to successfully price discriminate are that the firm must be able to identify different market segments based on their price elasticity of demand and secondly, the firm must exercise some monopoly power over the market. The willingness to pay off the customers should be identified so that the entire consumer surplus is reaped by the firm.

The two examples of price discrimination which are practiced in daily lives are first, firms selling goods at a discount rate after it has covered fixed costs; the lower price would induce customer who was not able to afford the good will be willing to buy at their willingness to pay. Second, a happy or early bird discount is to clear demand for peak times so that people adjust their shopping time.

Rahul Sunny answered 1 year ago

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