Economics Price Discrimination Questions
First-degree price discrimination, also known as perfect price discrimination, is a pricing strategy where a seller charges each individual customer a price based on their willingness to pay. In this form of price discrimination, the seller has perfect information about each customer's preferences, demand, and ability to pay. The seller maximizes their profits by charging each customer the highest price they are willing to pay, resulting in capturing the entire consumer surplus. This strategy requires the seller to have detailed information about each customer and the ability to negotiate prices individually. Examples of first-degree price discrimination can be seen in personalized pricing for services like healthcare, legal advice, or car sales, where prices are tailored to each customer's specific circumstances.