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Price Discrimination definitions

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  • Price Discrimination
    Selling identical goods at varying prices to different buyers, based on their willingness to pay, maximizing firm profit.
  • Market Power
    Ability of a firm to control price and quantity, enabling it to set prices above competitive levels.
  • Monopoly
    Single seller dominating a market, possessing the power to influence prices and restrict output.
  • Elasticity of Demand
    Measure of how sensitive buyers are to price changes, affecting their willingness to pay.
  • Segregation
    Division of customers into distinct groups based on characteristics like willingness to pay.
  • Resale
    Transfer of purchased goods from one buyer to another, undermining price discrimination strategies.
  • Consumer Surplus
    Difference between what buyers are willing to pay and what they actually pay, representing buyer benefit.
  • Deadweight Loss
    Lost economic value from trades that do not occur, often due to restricted output or inefficient pricing.
  • Perfect Price Discrimination
    Charging each buyer their maximum willingness to pay, eliminating consumer surplus and deadweight loss.
  • Marginal Revenue
    Additional income earned from selling one more unit, guiding output and pricing decisions.
  • Marginal Cost
    Extra expense incurred from producing one additional unit, crucial for profit maximization.
  • Efficient Quantity
    Output level where marginal cost equals price, maximizing total welfare in a market.
  • Economic Profit
    Earnings exceeding all costs, including opportunity costs, often visualized as the area between price and average total cost.
  • Auction
    Competitive process where buyers bid for goods, revealing their maximum willingness to pay.
  • Willingness to Pay
    Maximum amount a buyer is prepared to spend for a good, determining pricing in discrimination strategies.