To practice indirect or second-degree price discrimination, a firm must have:
A) I and II
B) I, II, and III
C) II and III
D) I and III

Question

To practice indirect or second-degree price discrimination, a firm must have: 
A) I and II 
B) I, II, and III 
C) II and III 
D) I and III

Quizplus · Accepted Answer

Indirect or second-degree price discrimination involves offering different prices or discounts based on characteristics such as quantities purchased, time of purchase or location. To implement this type of discrimination, a firm must have:

II. Market power: This means that the firm must have the ability to set different prices. If there is perfect competition, the firm cannot charge different prices because consumers will simply switch to a competitor offering a lower price.

III. The ability to segment the market: The firm must be able to identify different groups of consumers with different willingness to pay. This can be done using demographic data, purchase history or surveys.

I. Geographic separation: Although geographic separation can be useful in identifying different market segments, it is not strictly necessary for indirect price discrimination. Therefore, option C, which includes II and III, is the best choice.

To Practice Indirect or Second-Degree Price Discrimination, a Firm Must