how price discrimination can generate more revenue

Expert Solution

Price discrimination is a pricing strategy that charges different prices to different customers for the same goods and services. companies can generate more revenue by adopting following types of price discrimination strategies.

1) First degree price discrimination: Under this type of price discrimination strategies, the company identifies what their customers are willing to pay for their product or services. The company eliminate customer surplus and charge as much as they ready to pay for the product. Customer surplus is derived when the price a customer actually pays is less than they are ready to pay. For this purpose the company should have adequate information regarding each customer. Eg: secon hand car dealer.

2) Second degree price discrimination: Under this type of price discrimination strategies, customers ,are given special considerations and discounts for bulk purchases they made. These benefits are not available for those who purchase single quantity. Eg: quantity discounts, buy-two-get-one-free etc.

3) Third degree price discrimination: Under this type of price discrimination strategies, discounts are given to certain group of people such as students, senior citizen etc. Such people may not be able to purchase purchase goods and services due to lower level of income. companies can get benefit from by giving discounts to such groups, Eg: Amusement park, movie ticket, zero balance account from bank etc.

ekkarill92 answered 1 year ago

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SHOW HOW A FIRM CAN MAXIMIZE TOTAL REVENUE BY PRICE DISCRIMINATING

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