Economists typically divide price discrimination into three
broad types, known cleverly as 1st, 2nd and 3rd degree price discrimination. More usefully:
- 1st degree - perfect price discrimination
- Impossible without psychic abilities or Psychic Cash Registers® and psychic vending machines®. It means charging each customer a different price, the maximum
they would ever pay. This is what auto salespeople and realtors
attempt to do.
- 2nd degree - quantity discounts or nonlinear pricing
- Different per unit price depending on how much is purchased, relatively
- 3rd degree - group customers according to demand elasticity
- Most common form. All the examples on the prior page and that
we will consider here are of this type.
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