Price Discrimination refers to the practice of charging different prices to different customers for the same product or service. It occurs when a seller is able to differentiate customers based on their willingness to pay, and charges a higher price to those who are willing to pay more.There are several types of price discrimination. The most common form is first-degree price discrimination, in which the seller charges each customer the maximum price that they are willing to pay. This is also known as perfect price discrimination, as it allows the seller to capture the maximum possible profit from each sale.Second-degree price discrimination involves charging different prices to different groups of customers based on the quantity of the product or service that they purchase. For example, a seller may offer bulk discounts to customers who buy larger quantities of a product.Third-degree price discrimination involves charging different prices to different groups of customers based on their characteristics or circumstances. This can include charging higher prices to customers who are more willing or able to pay, such as business travelers or tourists, or charging lower prices to customers who are less able to pay, such as students or seniors.Price discrimination can be effective in maximizing profits for sellers, but it can also lead to inequalities and create other market inefficiencies. In some cases, it may be considered unethical or may be regulated by laws or policies designed to protect consumers.
