10.1 Conditions for Price Discrimination
We start by studying the most common form of nonuniform pricing, price discrimination, where a firm charges various consumers different prices for a good.2
Why Price Discrimination Pays
For almost any good or service, some consumers are willing to pay more than others. A firm that sets a single price faces a trade-off between charging consumers with a high willingness to pay a high price and charging a low enough price to sell to other customers with a lower willingness to pay. As a result, a single-price firm sets an intermediate price. By price discriminating, ...
Get Managerial Economics and Strategy, 2/e now with the O’Reilly learning platform.
O’Reilly members experience books, live events, courses curated by job role, and more from O’Reilly and nearly 200 top publishers.
