Abstract
Perfectly competitive firms usually have no appreciable influence over price, whereas the firms under imperfect competition are able to select the prices most consistent with their goals, at least most of the time. Consequently, monopolistic and oligopolistic firms generally possess a greater degree of market power and price-setting ability than their counterparts operating under conditions of perfect competition. This chapter reviews some additional pricing policies of price-making, or price-searching, firms. A firm is said to be engaging in first-degree or perfect price discrimination if it charges a different—unique—price to each customer. Another form of price discrimination is a diluted version of perfect price discrimination. Under second-degree price discrimination, or quantity-discount pricing, the firm charges successively lower prices for each additional range of output purchased. Yet another type of price discrimination occurs when a firm charges varying prices to different groups of customers. Such pricing is also referred to as multiple-market price discrimination.
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