Discriminatory pricing

PRICE DISCRIMINATION :

Price discrimination refers to the practise of a seller to charge different prices for different customers for the same commodity , without any corresponding differences in cost.

Types Of Price Discrimination :

There are three types of price discrimination in the market :
1. Perfect price discrimination
2. Market segment based price  discrimination
3. Price discrimination by self- selection.

1) perfect price discrimination:

It is also known as the price discrimination of the first degree. Here the producer exploits the consumer to the maximum possible extent by asking him to pay the maximum he is prepared to pay.
The producer will not allow any consumer surplus to the consumer.
Here each individual is a customer segment in herself/ himself.
E.g, bidding

2) Market segment based price discrimination:

It is also known as the price discrimination of the third degree where the markets are divided into many sub markets or sub groups. The price charged in each segment depends upon the ability to pay for different sub groups in the market.

For e.g., age based discounts given in railway tickets- senior citizens are charged differently than other customers ;
Student bus pass
; concession in educational fee in colleges or schools based on reservation or concession provided on the basis that the parent belongs from defence background etc. are the examples of this.

3) Price discrimination by self-selection:

This is the discrimination of second degree. Here the producer charges different units of the same commodity ,but not at a maximum possible rate but at a lower rate.

It is just opposite of perfect price discrimination. The only difference is that in case of perfect price discrimination the customer is charged the maximum price he is willing to pay whereas in case of price discrimination by self selection the customer is charged the least he is willing to pay.
For e.g, reverse bid- here the bid goes to one who has quoted the least price.
Movie tickets- differents prices are charged for different classes of seats like gold class , platinum class , balcony seats etc.
Big bazar's wednesday bazar.
Opting for PDS system etc...