Learning Objectives:

At the end of this lesson, the students

should be able to:
-Understand the concepts of Price Discrimination.
-To know how what is Direct and Indirect Price
Discrimination
-Discuss about what is bargaining and examples
 What is Price
Discrimination?
Price discrimination is a selling strategy that charges
customers different prices for the same product or
service based on what the seller thinks they can get the
customer to agree to. With price discrimination, a seller
charges customers a different fee for the same product
or service.
 Example of Price
Discrimination

issuing coupons, applying specific discounts (e.g., age

discounts), and creating loyalty programs. One
example of price discrimination can be seen in
the airline industry. Consumers buying airline tickets
several months in advance typically pay less than
consumers purchasing at the last minute.
 Is Price Discrimination
Illegal?
The word discrimination in price discrimination does not
typically refer to something illegal or derogatory in
most cases. Instead, it refers to firms being able to
change the prices of their products or services
dynamically as market conditions change, charging
different users different prices for similar services, or
charging the same price for services with different costs.
Types of Price Discrimination

First-Degree Price Discrimination

First-degree discrimination, or perfect price discrimination,

occurs when a business charges the maximum possible price
for each unit consumed. Because prices vary among units,
the firm captures all available consumer surplus for itself or
the economic surplus.
Types of Price Discrimination
Second-Degree Price Discrimination

-occurs when a company charges a different

price for different quantities consumed, such
as quantity discounts on bulk purchases.
Types of Price Discrimination
Third-Degree Price Discrimination

-occurs when a company charges a different price to

different consumer groups. For example, a theater may
divide moviegoers into seniors, adults, and children, each
paying a different price when seeing the same movie. This
discrimination is the most common.
Would it be Better Off If Everybody Paid the
Same Price?
In wider manner, NO. Different customer
segments have different characteristics and
different price points that they are willing to pay.
If everything were priced at say the "average
cost," people with lower price points could never
afford it.
When Can Companies Successfully Apply
Price Discrimination?

Economists have identified three

conditions that must be met
for price discrimination to occur.
1. The company needs to have
sufficient market power.
2. It has to identify differences in demand
based on different conditions or customer
segments.
3. The firm must have the ability to protect
its product from being resold by one
consumer group to another.
 Bargaining
First-Degree Price Discrimination

First-degree discrimination, or perfect price discrimination,

occurs when a business charges the maximum possible price
for each unit consumed. Because prices vary among units,
the firm captures all available consumer surplus for itself or
the economic surplus.
 Bargaining
It is the discussions between people in order
to reach agreement on something such as
prices, wages, or working conditions. It’s a
process where parties negotiate terms and
conditions, often revolving around a single
issue, such as price.
 Types of Bargaining

1. Collective Bargaining

2. Individual Bargaining

3. Hard vs. Soft Bargaining

 Types of Bargaining

4. Bargaining Power

5. Status Quo Point:

Thank you!!!