What is price discrimination?

Price discrimination happens when firms charge different people different prices for the exact same good or service. For example, a student at Shorewood High School gets to pay $8 to see "Billy Elliot" whereas I (an adult) have to pay $12 to see the exact same (amazing) movie at the exact same time.

1st degree price discrimination: when different people pay different prices for the same product because they have different price elasticities of demand; the value of the good is subjective and people are willing to pay different prices depending on their desire.
example: (identical) goods at the flea market in Lausanne

2nd degree price discrimination: when different people pay different prices for the same product because they purchase different amounts; the more consumers buy, the less (per unit) they have to pay.
example: Coca-Cola's purchase of sugar versus your purchase of sugar (per unit).

3rd degree price discrimination: when different people pay different prices for the same product because they fit into different market segments like age or location. The market segmentation is derived by different price elasticities of demand (i.e. students have more elastic demand than adults due to their having much less disposable income).
example: student discount at a sporting event

Economics du jour

Price discrimination of the 2nd degree in the Daily Bulletin!

Valentine's roses are available! You can order roses for your friends and loved ones on Monday and Tuesday with Mrs. H, and proceeds from the sale will go to Habitat, ACN and the Nepal trip. 6 CHF for a single rose, 5 CHF each for 2 or more, and 50 CHF for a bouquet of a dozen (12). Pick up your orders on Friday between 9am and 5pm in the BE office. Happy Valentine's Day to all!