Managerial Economics and Strategy, 2/e

10.3 Group Price Discrimination

Most firms have no practical way to estimate the reservation price for each of their customers. But many of these firms know which groups of customers are likely to have higher reservation prices on average than others. A firm engages in group price discrimination by dividing potential customers into two or more groups and setting different prices for each group. Consumer groups may differ by age (such as adults and children), by location (such as by country), or in other ways. All units of the good sold to customers within a group are sold at a single price. As with individual price discrimination, to engage in group price discrimination, a firm must have market power, be able to identify groups with different ...