c) Third degree price discrimination

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4 Terms

1
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  • third degree price discrimination


  • when a firm charges a different price to different consumers for the same good/service


2
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  • the conditions required for third degree price discrimination to be successful


  • the firm is a price maker

  • there are no/few substitutes

  • different consumers have different PEDs

  • consumers by can be separated by their PEDs

  • resale of elastically priced goods in the inelastic market can be prevented


3
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  • the effect of third degree price discrimination on consumers


  • low consumer surplus for inelastic PED consumers

  • high consumer surplus for elastic PED consumers


4
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  • the affect of third degree price discrimination on firms


  • revenue increases

  • administrative costs are introduced