6.1 First-Degree Price Discrimination: With first-degree price discrimination marginal revenue is equal to price. First-degree price discrimination allows you to extract the entire surplus that selling a product generates The quantity demanded equates marginal benefit with the marginal cost to the consumer of buying the last unit where, marginal cost to the consumer is just the price for that last unit. With Third-degree discrimination, there is no difference in pricing between first unit bought and the last unit bought. The average price to each type of customer is the same under either first or third degree price discrimination. 6.2 Second-Degree Price Discrimination or Menu Pricing Second-degree PD is usually implemented by offering quantity discounts targeted to different consumer types. This is a variant of the block-pricing strategy,
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This note was uploaded on 02/23/2012 for the course ECON 445 taught by Professor Mcmanus during the Summer '08 term at UNC.