Price Discrimination Definition, Types, Example and Numerical | Ecoholics

Price discrimination is the practice of charging a different price for the same good or service. There are three types of price discrimination - first-degree, second-degree, and third-degree price discrimination.
First degree
First-degree price discrimination, alternatively known as perfect price discrimination, occurs when a firm charges a different price for every unit consumed.
Second-degree
Second-degree price discrimination means charging a different price for different quantities, such as quantity discounts for bulk purchases.
Third degree
Third-degree price discrimination means charging a different price to different consumer groups.
Splitting the market into peak and off peak use is very common and occurs with gas, electricity, and telephone supply, as well as gym membership and parking charges. Third-degree discrimination is the commonest type.
The firm is able to charge the maximum possible price for each unit which enables the firm to capture all available consumer surplus for itself. In practice, first-degree discrimination is rare.
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