Price Discrimination and Types

Price Discrimination

What is price Discrimination? 

Price Discrimination means charging a different price for the same product from customers.

Example - Railway charges a different price for the different age group of people. As for senior citizen, railway provides 40% concession on fare for male, where 50% concession on the fare for females. Children’s who are in the age group of 5 to 8 years are charged half fare charged for adults.

Types of Price Discrimination: -

First-degree Discrimination:- It is also called as perfect price discrimination. when price changes at its maximum level for every single unit consumption is called first-degree of discrimination. 

Example:-We can see, airfare, for every single ticket, booked they increase the airfare according to the demand.

Second-degree price Discrimination:- When different price charge for consumption of the different quantity of goods is called as second-degree of discrimination. 

Example:- we can see distributor/traders able to purchase any good at a lesser price from any producer/seller than any consumer who buys a single piece.

Third-degree price Discrimination:- When seller divide the customer’s in different groups and subgroups and charge a different price according to the groups and subgroups, called as third-degree of discrimination.

Example:- we can see, different prices are offered for movie tickets for the people of different age group.