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What is price discrimination
Selling the same product to different people at different prices
What are the principles of price discrimination
The demand cure being different makes it more profitable to set prices at different prices
To maximize profit the firm should set a higher price in markets with more inelastic demand
Arbitrage makes it difficult for a firm to set different prices in different markets
What is arbitrage
Taking advantage of price differences for the same good in different markets by buying low in one market and selling high in another market
EX: when somebody buys a stock on one exchange for 10 dollars and immediately sells it on another exchange for 11 dollars
What is perfect price discrimination
Each customer is charged their maximum willingness to pay
What is tying
To use one good a consumer must use a second good that is sold by the same firm
EX: printer from best buy only works with ink from best buy
What is bundling
Requiring that products be bought together in a bundle or package
EX: Microsoft bundling excel, word, outlook, and powerpoint in one package
