ECS3830 Tute7.Answers.doc - ECS3830 Tutorial 7_Questions 1...

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ECS3830 Tutorial 7_Questions 1. What conditions must be satisfied for a producer to be able to implement price discrimination? Price discrimination exists if firm enjoys some degree of market power (i.e., discretion to choose its own prices). Able to segment the market (product can be divisible into submarkets)(which there are different demand conditions (or different price elasticities of demand). Multiple markets with no reselling between consumers in different submarkets. Price elasticity of demand differs across submarkets. 2. Explain carefully the distinction between the three degrees of price discrimination. First degree price discrimination Second degree price discrimination (slide from slide 15) Making the price per unit of output depend on the number of units purchased. Second degree related to quantity discounts. (bulk discounts) Different price is charged for a different quantity bought All consumers who buy the same units pay the same price per unit.
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