Price Discrimination

First-degree price discrimination: a monopolist is able to charge each customer the highest price the customer is willing to pay.

If the monopolist knows the exact demand schedule of the customer, then the monopolist is able to capture the entire consumer surplus.

Another possibility is that public price disclosure is non-existent.

Not every consumer is worse off, because some consumers may be charged a price that is below that of perfect competition.

Second-degree price discrimination: the monopolist offers a menu of quantity-based pricing options to induce customers to self-select based on how highly they value the product. (volume discounts, volume surcharges, coupons, product bundling, and restrictions on use.)

Also: quality-based pricing options (e.g., professional grade).

Third-degree price discrimination: customers are segregated by demographic or other traits.

(e.g., software licensed student version and professional version)