Price discrimination – Practice of charging different prices to different consumers for similar goods.
First-Degree Price Discrimination – Practice of charging each customer her reservation price (maximum price that a customer is willing to pay)
Second-Degree Price Discrimination – Practice of charging different prices per unit for different quantities of the same good or service.
Third-Degree Price Discrimination – Practice of dividing consumers into two or more groups with separate demand curves and charging different prices to each group.
Variable profit –Sum of profits on each incremental unit produced by a firm; ex. profit ignoring fixed costs.
Block pricing – Practice of charging different prices for different quantities or “block” of a good.
Profit maximization = MR1 = MR2 = MC
1
1+1 / E¿
¿
Determining relative prices: ¿ 1
P 1 = (1+ E 2)
P2 ¿
