What is nonlinear price discrimination?
Second-degree price discrimination, or nonlinear pricing, involves setting prices subject to the amount bought, in an attempt to capture part of the consumer surplus. A bulk sale strategy, such as quantity discounts, will be applied and consumers will choose the block that better suits them.
What is meant by non linear pricing?
A nonlinear pricing schedule refers to any pricing structure where the total charges payable by customers are not proportional to the quantity of their consumed services. Such heterogeneity of preferences leads customers to choose different pricing plans based on their expected demand.
What is the example of non linear pricing?
Non-linear prices are prices that vary depending on the amount of consumption by the customer. An example might be a water tariff, which has higher per gallon or per liter prices for higher levels of consumption than for lower levels of consumption.
Why would a company use nonlinear pricing?
Nonlinear pricing is motivated by several goals such as: efficient use of resources, cost recovery by a regulated utility, exercise of monopoly power, obtaining competitive advan- tage, rewarding customer loyalty as well as social goals such as subsidies to the poor and discounts to service persons in uniform.
Who gave the concept of price discrimination?
Modern taxonomy. The first/second/third degree taxonomy of price discrimination is due to Pigou (Economics of Welfare, 3rd edition, 1929).
Which of the following is not a type of price discrimination?
The correct answer is D. Charging the same price to everyone for a good or service is not price discrimination.
What are some examples of price discrimination?
Examples of forms of price discrimination include coupons, age discounts, occupational discounts, retail incentives, gender based pricing, financial aid, and haggling.
Which are different types of non linear pricing strategies?
Nonlinear pricing can be broadly classified in two categories – increasing block and decreas- ing block. In an increasing block pricing scheme, the marginal (per-unit) prices increase with quantity, whereas in a decreasing block scheme the marginal prices decrease with quantity.
What firms Cannot price discriminate?
The firm must have some market power. Market power means that a firm faces a downward sloping demand curve for their product. For example, monopolies and monopolistically competitive firms can price discriminate. – Competitive firms cannot price discriminate (they are price takers).