Econ - Chapter 15 Pricing Strategies
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8 Terms
Single price monopolist
Changes a single price to all consumers
Price discrimination
When firms charge different prices based on a consumer’s willingness to pay rather than arbitrary characteristics
What type of firm cannot practice price discrimination because it can only charge the market price?
A perfectly competitive firm
What are the requirements for successful price discrimination?
Possess market power, be able to identify customers who have a higher willingness to pay, limit the ability for customers to resell the product
What is the law of one price?
Identical products should sell for the same price everywhere
What do we do with customers with low price elasticity?
They will often be charged higher prices
What happens when there is perfect price discrimination?
Firms charge each customer a unique price based on each persons’ maximum willingness to pay, there is no deadweight loss, and no consumer surplus