Question

Please answer First, Second and third degree price discrimination with business world examples

Answer 1

Price Discriminations are of mainly 3 types :

1. First degree price discrimination

​​​​​​The first degree price discrimination is also known as perfect price discrimination. For every consumed unit, a firm charges various prices then the first degree price discrimination will occurs. For gain all the consumer surplus, the firm will charge maximum possible price on each consumed unit.

The examples for the first degree price discrimination includes cost of travel and airlines, pricing based on gender, premium pricing and coupons etc.

2. Second degree price discrimination

​​​​​​​​​​​​For different quantities consumed, the firm will charge different prices as like , quantity discount given for the bulk of product purchase. The prices will also alters on the basis of demanded quantities in the case of second degree price discrimination.

The major examples for the second degree price discrimination includes, quantity discounts and block - pricing. The quantity discounts will happen when the consumers purchase more units with low price for each unit. For the products like gas, internet, electricity etc, the consumer will pay various prices for different blocks. It referred as block - pricing.

3. Third degree price discrimination

For a same product the there will be having various groups of consumers. The third degree price discrimination occurs when the price of that product sets different for various groups of consumers. Categorisation of consumer group will be based on consumers age, location, sex etc.

The examples for the third degree price discrimination includes the the similar examples of first degree price discrimination such as retail incentives, pricing based on premium, coupons, travel and airline costs etc. Each of above cases, the group of consumers will categorised according to some attributes like age, sex, economic status etc.