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Degrees of Price Discrimination

Here we understand the concept of Price Discrimination and its Degrees in detailed.

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Degrees of Price Discrimination
First we understand what is Price Discrimination-
Price Discrimination refers to the act of charging different prices for different units of a commodity, though all these units are in fact indentical so far as physical features are concerned.
Professor A.C. Pigou has explained Degrees of price discrimination as follows:
  1. Price Discrimination of the First Degree: Price discrimination of the first degree occurs when the monopolist is able to charge for each unit of the commodity the highest price which the consumer is willing to pay. In other words, the buyer is forced to pay a price which is equal to the maximum amount which he is willing to pay for the commodity rather than go without it.
  2. Price Discrimination of the Second Degree: In price discrimination of the second degree, here the buyers are divided on such a basis that in each market the lowest price which the poorest member of the group is prepared to pay is charged from all the member of the group is ready to pay charged from all the members of that group.
  3. Price Discrimination of Third Degree: Price discrimination of the third degree is said to occur when the monopolist divides his buyers into two or more than two submarkets and charges a different price in each market. The price charged in each submarket depends on the output sold in that market and demand conditions in it. This type of Price discrimination is common. For eg- dumping device, here when the producer sells his product at higher price in the home market than in the foreign market.

Degrees of Price Discrimination
First Degree of Price Discrimination
Second Degree Discrimination
Third Degree of Price Discrimination.
Price Discrimination- Degrees of Price Discrimination.
Tech writer at NewsandStory