4.1.5.7 What are the types of price discrimination

1st, 2nd, and 3rd degree

What are the types of price discrimination?

1st degree

In this type of price discrimination, firms charge each consumer the maximum price they are willing to pay for every unit consumed. In theory this captures all consumer surplus and turns it into producer surplus

information, willingness, approximated

In first degree price discrimination, the firms requires very detailed _________ on individual consumer’s _________ to pay, which is hard in practice. Hence, this is rare and can only be ________.

Uber, demand, location, time, resale, adjusted

AO2 First degree price discrimination:

____ during periods of surge pricing. Prices change depending on ______, ______, and ___, meaning different prices for similar journeys.This works as _____ is impossible and prices can be ______ quickly using data and algorightms.

2nd degree

In this type of price discrimination, consumers are charged different prices based on the quantity purchased or the version of the product, rather than who they are.

willingness, self-reflect, options, price per unit

In second degree price discrimination, the firm doesn’t need to know exactly who has a higher ________ to pay; instead customers ______ by choosing different ______. Larger quantities or premium versions usually have a low _____ ____ ____.

British Gas, electricity tariffs, mobile phone contract, bulk discounts, supermarkets, resale, demand

AO2 Second degree price discrimination:

______ ____ offering different _____ ____, or ____ ___ _____ where higher data packages cost more overall but less per gigabyte. Another example is ____ _____ in __________. This works when _____ is difficult and when consumers have different ______ levels.

3rd degree

In this type of price discrimination, the firm charges different prices to different groups of consumers, based on observable characteristics like age, occupation or location. Each group has different PED and firms charge higher prices to groups with more inelastic demand. This is the most common and realistic form of price discrimination.

National Rail, identification, resale

AO2 Third degree price discrimination:

_______ ____ offers lower ticket prices for students, children, and senior citizens, while adults pay higher fares. This works because _______ is easy, _____ is difficult, and demand elasticities ______ between groups.