Price leadership is a strategy where a dominant firm in a given industry is able to exert enough influence

that it can effectively determine the price of goods or services for the entire market. This phenomenon is
common in industries that have oligopolistic market conditions.

There are three primary models of price leadership:

1. **Barometric**: This occurs when a particular firm is more adept than others at identifying shifts in
applicable market forces, such as a change in production costs.

2. **Collusive**: In this model, firms collaborate to set prices collectively[^10^].

3. **Dominant**: Here, the leading firm unilaterally sets the price[^10^].

Certain economic conditions make the emergence of price leadership more likely within an industry:

- The number of companies involved is small.

- Entry to the industry is restricted.

- Products are homogeneous.

- Demand is inelastic, or less elastic.

- Organizations have a similar long-run average total cost (LRATC).

Price leadership is often used as a strategy among large corporations⁹. It's important to note that while
price leadership can benefit the leading firm, it can also have implications for competition and consumer
choice in the market[^10^].

Price discrimination is a pricing strategy where a seller charges different prices for the same product or
service to different customers¹. This strategy is based on the seller's belief that customers in certain
groups can be asked to pay more or less based on certain demographics or on how they value the
product or service in question¹.

There are three types of price discrimination¹²:

1. **First Degree Price Discrimination**: Also known as perfect price discrimination, it involves charging
each customer the maximum price they are willing to pay¹².
2. **Second Degree Price Discrimination**: This involves charging different prices based on the quantity
consumed. For example, a phone plan might charge a higher rate after a certain amount of minutes are
used¹².

3. **Third Degree Price Discrimination**: This involves charging different prices to different consumer
groups or market segments. For example, a movie theater might charge different prices for minors,
adults, and seniors¹².

For price discrimination to be successful, certain conditions must be met²:

- The firm must operate in a market with imperfect competition and have some degree of monopoly
power².

- The firm must be able to prevent resale. That is, consumers who purchase at a lower price must not be
able to resell to other consumers who would have paid a higher price.

- Consumer groups must demonstrate varying elasticities of demand.

While price discrimination can increase a firm's profits, it can also have implications for consumer
welfare and market efficiency.

Sure, let's delve deeper into each type of price discrimination with examples:

1. **First Degree Price Discrimination**: This is also known as perfect price discrimination. In this case,
the seller charges each customer the maximum price they are willing to pay. This requires the seller to
know each buyer's maximum willingness to pay, which is often difficult in practice. However, online
auctions like eBay can be an example of this, where each buyer bids their maximum willingness to pay
for a product.

2. **Second Degree Price Discrimination**: This involves charging different prices based on the quantity
consumed. For example, a phone plan might charge a higher rate after a certain amount of minutes are
used. Another example is bulk pricing in supermarkets, where buying in larger quantities results in a
lower price per unit.

3. **Third Degree Price Discrimination**: This involves charging different prices to different consumer
groups or market segments. For example, a movie theater might charge different prices for minors,
adults, and seniors. Another example is airlines offering different prices for economy and business class
seats.

Remember, for price discrimination to be successful, the firm must operate in a market with imperfect
competition, prevent resale, and consumer groups must demonstrate varying elasticities of demand.
While price discrimination can increase a firm's profits, it can also have implications for consumer
welfare and market efficiency.