DEGREE'S OF DISCRIMINATION

PRICE DISCRIMINATION:  

Price discrimination is that it defines a business charging different prices to different customers for the same product. This price discrimination is not same as the product differentiation., where the quality, characteristics of good or service differ from person to person.

Types of price discrimination:

There are three types of price discrimination:

1.       1^st degree discrimination

2.       2^nd degree discrimination

3.       3^rd degree discrimination

* 1^st degree discrimination is charging different prices for each individual. i.e., willing to pay.

Example: Auctions à In auctions, bidding takes place upon their own in decision making. They are willing to bid to their price. so this is called 1^st degree discrimination.

*2^nd degree discrimination depends upon the quantity sold and the time of purchase. i.e., purchase of bulk commodities which gives cashback or coupons, the price normally will be different from the price paid for the bulk qualities.

Example:  For electricity, consumers get charged by different tariffs depends upon the quantity consumed. The one who consumes more will be charged as high tariffs and the ones who consumes less with the low tariffs.

*3^rd degree discrimination, it is also called as segment based price discrimination it depends upon the group of people generally done on the basis of age, discount, social/economic reservation

Age based is mostly observed in airline, ticket rate will differ based on ages.

Example: Scholarship is given only to specific category of students not for all here the price what the non-scholarship student fee will differ from the scholarship student.

Bus pass is also an another example which will explain about the third degree price discrimination

We have student yearly passes, metro bus passes, senior citizen passes, employee passes.

There is difference between each category this shows price discrimination.