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Price discrimination is present throughout commerce. Third degree price discrimination also known as group price discrimination third degree price discrimination involves charging different prices depending on a particular market segment demographics demographics refer to the socio economic characteristics of a population that businesses use to identify the product preferences and purchasing behaviors of customers.

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For example rail and tube subway travellers can be subdivided into commuter and casual travellers and cinema goers can be subdivided into adults and children with some theatres also offering discounts to full time students and seniors.

Third degree price discrimination. Third degree price discrimination is the most common type of price discrimination because classifying customers into a few groups is easier for a firm than knowing the reservation price the maximum amount that consumers are willing to pay of each unit of its output. Third degree price discrimination the price varies according to consumer attributes such as age sex location and economic status. For a firm to practise price discrimination it requires.

The differences in elasticity enable you to charge customers in each group purchasing the good different prices. Third degree price discrimination occurs when firms charge different prices to different groups of customers. Third degree price discrimination provides a way to reduce consumer surplus by catering to the price elasticity of demand of specific consumer subsets.

They know which consumers belong to which group. Ability to set prices. Ability to segment different classes of consumers e g.

Stop adults using student tickets. Your business is practicing third degree price discrimination when you partition the market into two or more different groups of consumers based upon different price elasticities of demand. Following are a few real life examples of third degree price discrimination.

Examples include airline and travel costs coupons premium pricing gender based pricing and retail incentives. Third degree price discrimination the most common form of price discrimination third degree price discrimination can also be called group pricing the term describes when a seller charges buyers different prices depending on their particular market segments such as age profile income group or time of use. In the real world third degree price discrimination is quite common.

Third degree price discrimination means charging a different price to different consumer groups. Third degree discrimination is linked directly to consumers willingness and ability to pay for a good or service. It means that the prices charged may bear little or no relation to the cost of production.

This form of discrimination can be applied when companies are able to identify at least two groups of consumers that have a similar willingness to pay i e. Rail card to prove you are a senior citizen ability to prevent resale.