Price Discrimination

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  • Firm charges different prices to different consumers
  • Changing prices for SIMILAR goods is not price discrimination
  • Product differentiation is not the same as Price disc. Product diff. gives producer more control over price die to consumers' perception that there is a difference in the product

Necessary conditions - 

- Must be difference in PED from each group of consumers. Firm can charge more to group with higher price inelesticity of demand. MR=MC profit max in both groups.

- Producer must be able to prevent market seepage: consumers can't switch groups easily.


- Perfect P.D: Charging whatever the market will bear. Separates market into individuals and what the are prepared…


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