ECON 351x Lecture Notes - Lecture 9: Reservation Price
Document Summary
First-degree price discrimination = practice of charging each customer her reservation price. Third-degree price discrimination = don"t know how much they value my product, but they divide them in group; charge different prices to different groups. We do the profit maximization twice: for each of that groups. Because the market is more inelastic, charge lower price for the elastic market. Second-degree price discrimination = practice of charging different prices per unit for different quantities; ex/ if you buy more shit it will end up being cheaper. Intertemporal price discrimination = separating consumers with different demand functions into different groups by charging different prices at different times. Ex/ summer clothes are more expensive at beginning of season. They might be eager to cut prices earlier and sell to them, but next season no one will trust that you only drop it at end; need to wait so consumers trust you.
