Table of Strategies
Comparison of Price-Discrimination Strategies
|
Strategy |
Description |
Benefits |
Risk/costs |
Necessary conditions |
|
First-degree price discrimination |
Each unit is sold for the maximum price each buyer is willing to pay |
1. No alternative strategy is more profitable 2. Allows the firm to price the more price sensitive buyer into the market |
1. Buyers have an incentive to disguise their willingness to pay 2. Ability to extract full willingness to pay is unlikely |
1. Must have some degree of market power 2. Must be able to prevent resale of the good 3. Knowledge of each buyer’s willingness to pay |
|
Quantity discounts |
The buyer is offered a quantity at an average price that ... |
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