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Price discrimination is the practice of charging different prices to different consumers for the same good, or charging different prices for different amounts bought. First-degree or perfect price discrimination is the practice of charging each consumer an amount equal to his willingness-to-pay. Second-degree price discrimination or nonlinear pricing is the practice of charging a consumer a price per unit that depends on the purchase amount. Third-degree price discrimination is the practice of charging different prices for the same good to consumers belonging to different groups, depending on the price elasticity of demand in each group.

 

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