First Degree: This type of pricing strategy takes place when businesses can accurately determine what each customer is willing to pay for a specific product or service and selling that good or service for that exact price. (ie car sales)
Second Degree: Companies price products or services differently based on the preferences of various groups of consumers. (ie Costco vs Whole Foods)
Third Degree: Companies price products and services differently based on the unique demographics of subsets of its consumer base, such as students, military personnel, or seniors. (ie flights)
The purpose here is for a company to identify the maximum consumer surplus it can acquire. As commented below, this surplus also changes based on supply/demand. Supply/demand change based on competitive products or substitute products.
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First Degree: This type of pricing strategy takes place when businesses can accurately determine what each customer is willing to pay for a specific product or service and selling that good or service for that exact price. (ie car sales)
Second Degree: Companies price products or services differently based on the preferences of various groups of consumers. (ie Costco vs Whole Foods)
Third Degree: Companies price products and services differently based on the unique demographics of subsets of its consumer base, such as students, military personnel, or seniors. (ie flights)
The purpose here is for a company to identify the maximum consumer surplus it can acquire. As commented below, this surplus also changes based on supply/demand. Supply/demand change based on competitive products or substitute products.