Economics Year 13 revision Day 11 - Price Discrimination
On day 11 of the Year 13 recap we review the different forms of price discrimination and the challenges that firms face when charging different prices for different consumers.
Across many industries, firms segment the market into different customer segments and charge different prices based on the logic of the market segmentation.
The most sophisticated price discrimination model used by producers is third-degree price discrimination. This is when firms charge consumers different prices based on their willingness and ability to pay for a good. Firms will benefit from charging higher prices to those that are willing to pay for it and lower prices to those that do not value the good as highly as others. This pricing model helps producers raise revenue but hurts consumer surplus.
Here Jack explains the price discrimination revision slide.