Price discrimination and two-part tariffs

Price discrimination

Barriers to resale

First-degree price discrimination

perfect. have complete knowledge of customers

Customer pays reservation price.

Requires firm to know reservation price.

Second-degree price discrimination

discounts for quantity. eg industrial orders. have no knowledge of customers

Price varies by quantity ordered.

Third-degree price discrimination

different for different groups. eg student discount. have knowldege of groups

Different prices to different customer segments.

Two-part tariff

Subscription services are a type of two-part tariff.