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first-degree price discrimination


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Price discrimination where consumers are charged the maximum amount they are willing to pay for each unit of a good. This means that the producer obtains all the gains from the good being available, and there is no consumer surplus. Producers generally do not have sufficient information about their customers to be able to practice first-degree price discrimination. In contrast, second-degree price discrimination, where customers are offered a choice of possible contracts, and third-degree price discrimination, where different prices are charged to different classes of customer, are relatively common.

Subjects: Economics.


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