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Price discrimination (differential pricing, [1] [2] equity pricing, preferential pricing, [3] dual pricing, [4] tiered pricing, [5] and surveillance pricing [6]) is a microeconomic pricing strategy where identical or largely similar goods or services are sold at different prices by the same provider to different buyers based on which market segment they are perceived to be part of.
Market power is a company's ability to increase prices without losing all its customers. Any company that has market power can engage in price discrimination. Perfect competition is the only market form in which price discrimination would be impossible (a perfectly competitive company has a perfectly elastic demand curve and has no market power).
The Pacman conjecture holds that durable-goods monopolists have complete market power and so can exercise perfect price discrimination, thus extracting the total surplus. [1] This is in contrast to the Coase conjecture which holds that a durable goods monopolist has no market power, and so price is equal to the competitive market price.
Monopoly pricing without perfect price discrimination results in market inefficiencies when compared to other market structures. The inefficiencies in question are a loss of both consumer and producer surplus otherwise known as a deadweight loss .
A two-part tariff (TPT) is a form of price discrimination wherein the price of a product or service is composed of two parts – a lump-sum fee as well as a per-unit charge. [1] [2] In general, such a pricing technique only occurs in partially or fully monopolistic markets.
Book V: Price Discrimination - This book explores the practice of price discrimination, where a single firm charges different prices for the same commodity. It discusses the concept of price discrimination and raises reflections on its desirability. Book VI: Monopsony - This book shifts the focus to the perspective of an individual buyer.
2.3 Wage discrimination. ... This is a similar power to that of a monopolist, which can influence the price for its buyers ... a group of perfectly competitive firms ...
Predatory pricing is a commercial pricing strategy which involves the use of large scale undercutting to eliminate competition. This is where an industry dominant firm with sizable market power will deliberately reduce the prices of a product or service to loss-making levels to attract all consumers and create a monopoly. [1]