PRICE DISCRIMINATION

PRESENTED BY: - RUHAAN KHAN

MOHD. SHAUZAB KAZMI

SHANTANU SHARMA

STUTI GARG

SUDEEP GUPTA
 INTRODUCTION
Where a firm exercises market power, the
opportunity may exist to further increase profits
by charging different prices to different
consumers, or to different groups of consumers for
reasons other than costs
 HISTORICAL
BACKGROUND
 N E C E S S A RY C O N D I T I O N S F O R
P R I C E D I S C R I M I N AT I O N

Differences in price elasticity of demand between

markets.
Barriers to prevent consumers switching from one
supplier to another.
 T Y P E S O F P R I C E D I S C R I M I N AT I O N

First-degree: the firm is aware of each buyer’s demand

curve
Second-degree: the firm charges a different price,
depending on the quantity each buyer purchases
Third-degree: the firm breaks buyers into groups based
upon their price elasticity of demand
 FIRST DEGREE PRICE
DISCRIMINATION

Each consumer is charged the price he/she is willing to pay.

Producer takes all the consumer surplus

6
 1 S T. D E G R E E P R I C E D I S C R I M I N AT I O N

Price

P1

PL
Demand

Q1 Q Quantity

7
 2ND DEGREE PRICE
DISCRIMINATION

Different price is charged for a different quantity bought (but not

across consumers).

set one price for a 1st bundle, a lower price for a 2nd bundle, ....

extract some, but not all of consumer surplus

8
2 N D D E G R E E P R I C E D I S C R I M I N AT I O N

Examples:

Telephone companies charging different prices for

different quantities

9
 MULTIPLE-PRODUCT
PRICING
Sub markets in Markets.

Eg- Students Discounts,Pension Holders, etc..

10
 3RD DEGREE PRICE
DISCRIMINATION
P P
MC
P 1
P 2
DT
D2
D1 MR2 MRT
MR1

Q1 Q Q 2 Q QT

Market1 Market 2 Mkt1&Mkt2

MR1=MC MR2=MC QT=Q1+Q2
Less elastic More elastic MR1=MR2=MC
Demand - Demand -
Lower price Higher Price
11
 EXAMPLES

Makro’s Company.

EasyJet & British Airways.

Coca-Cola
 ADVANTAGES

For Producers: It allows them to increase turnover and thus

profits.

For Consumers: It is likely to increase output and make the good

or service available to more people and the increased competition
in the market leads to lower prices and more choice
PERCEPTION
WORLD VIEW REGARDING PD…!!!
W H AT C A N H A P P E N I F P D I S
BANNED OR DISCONTINUED.