16.4 Price Discrimination

MyEconLab Concept Video

Price discrimination—selling a good or service at a number of different prices—is widespread. You encounter it when you travel, go to the movies, get your hair cut, buy pizza, or visit an art museum. At first sight, it appears that price discrimination contradicts the assumption of profit maximization. Why would a movie operator allow children to see movies at half price? Why would a hairdresser charge students and senior citizens less? Aren’t these firms losing profit by being nice to their customers?

Photo of a display board for a hairdresser showing different rates.

Why does a hairdresser charge seniors, veterans, and kids $3 less than other customers?

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