What is price discrimination?

Price discrimination is when the same product is sold in different markets at a different price.It is a way for the firm to maximise its profits from more efficient pricing by charging each producer the maximum he is willing to pay for the product(1st degree price discrimination) .Thus reduces consumer surplus to zero.For example a train ticket from nottigham to London might be sold at numerous different prices.For example during peak hours(where demand peaks) and demand is more relatively price inelastic people are willing to pay more eg weekends thus the price is higher.If the consumer is buying more than 1 unit he might be charged a different price(second degree price discimination using quantity).Different group of buyers may be charged different prices e.g student and retired could have been charged less as the firm tha price disciminates separetes consumers in different groups where each member of the same group is charged the same price.

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Answered by Nicholas T. Economics tutor

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