What are the different types of price discrimination that can be employed?

First-degree price discrimination, alternatively known as perfect price discrimination, occurs when a firm charges a different price for every unit consumed. The firm is able to charge the maximum possible price for each unit which enables the firm to capture all available consumer surplus for itself. In practice, first-degree discrimination is rare.
Second-degree price discrimination means charging a different price for different quantities, such as quantity discounts for bulk purchases.
Third-degree price discrimination means charging a different price to different consumer groups. For example, rail and tube travelers can be subdivided into commuter and casual travelers. Third-degree discrimination is the commonest type.
Price discrimination can only occur if the following holds:
The firm must be able to identify different market segments, such as domestic users and industrial users.
Different segments must have different price elasticities of demand.
Markets must be kept separate.
The firms must have some degree of monopoly power.

Answered by Economics tutor

1823 Views

See similar Economics A Level tutors

Related Economics A Level answers

All answers ▸

Using the data in Extract A, calculate, to one decimal place, the percentage change in the total net trade balance in goods with the UK’s top five trade partners from February - April 2012 to February–April 2013.


How does an increase in the interest rate affect the level of investment?


What is the law of diminishing (marginal) returns?


Choose an example of a demerit good and and a policy which may be used by the UK Government to help reduce its consumption


We're here to help

contact us iconContact ustelephone icon+44 (0) 203 773 6020
Facebook logoInstagram logoLinkedIn logo

© MyTutorWeb Ltd 2013–2025

Terms & Conditions|Privacy Policy
Cookie Preferences