Economics Perfect Competition Questions
Price discrimination refers to the practice of charging different prices for the same product or service to different groups of consumers. This strategy is employed by firms in order to maximize their profits by capturing the consumer surplus. Price discrimination can be achieved through various methods such as offering discounts to certain customer segments, implementing tiered pricing based on quantity or quality, or charging different prices based on the consumer's willingness to pay. The key requirement for successful price discrimination is the ability to segment the market and prevent arbitrage, ensuring that consumers in different segments are unable to resell the product or service at a lower price.