Under perfect price discrimination:
A) markets are segmented and each segment is charged a markup inversely proportional to the elasticity of demand.
B) each customer is charged the average price that others with his or her characteristics are willing to pay.
C) each customer is charged his or her maximum willingness to pay.
D) it is easy to arbitrage.

Question

Quizplus · Accepted Answer

Under perfect price discrimination, each customer is charged the maximum price they are willing to pay. This is because the seller has perfect information about the customer's willingness to pay and can extract the entire consumer surplus. This leads to the highest possible profits for the seller. Option A is a form of price discrimination but not perfect price discrimination. Option B describes personalized pricing, but not necessarily perfect price discrimination. Option D is not true because perfect price discrimination eliminates any opportunity for arbitrage.

Under Perfect Price Discrimination