Chapter 14: Price Discrimination

These flashcards cover key concepts related to price discrimination from the lecture notes.

Price Discrimination

The practice of charging more than one price for the same product.

Perfect Price Discrimination

Charging each buyer his or her maximum willingness to pay.

Arbitrage

The practice of reselling products purchased in one market to another market to take advantage of price differences.

Third-Degree Price Discrimination

Charging different prices to different groups of consumers based on their elasticity of demand.

Bundling

Selling multiple goods or services together as a package.

Tying

The requirement that the purchase of one product is dependent on purchasing another product.

Consumer Surplus

The difference between what consumers are willing to pay for a good and what they actually pay.

Deadweight Loss

The loss of economic efficiency that occurs when the equilibrium outcome is not achievable or not achieved.

Inelastic Demand

Demand that is not very responsive to price changes; consumers will buy similar quantities even if the price increases.

Elastic Demand

Demand that is very responsive to price changes; consumers will buy significantly less if the price increases.

Willingness to Pay

The maximum price a consumer is prepared to pay for a good or service.

Profit Maximization

The process of increasing profit to the highest possible level.

Dynamic Pricing

A pricing strategy where prices are adjusted in real-time based on market demand.

Quality Discrimination (Versioning)

Selling different versions of a product with different features at different prices.