Price discrimination which consists of charging different prices to different groups of customers for the same good or service, without any link to costs. There are three types of price discrimination. First-degree price discrimination occurs when different prices are charged to different individuals based on their willingness and ability to purchase, in order to capture their maximum consumer surplus. Second-degree price discrimination occurs when prices differ when different consumers purchase in different quantities. Third-degree price discrimination occurs when prices are charged differently due to the elasticity of consumer demand. The more inelastic demand will face a higher price under third-degree price discrimination. There are three main conditions for price discrimination. The first concerns the difference in price elasticity of demand. Different groups of consumers should have different elasticity of demand. Firms will be able to charge a higher price to a more inelastic group of demand and a lower price to a more elastic group. By using this method, businesses can increase their profits, which increases their producer surplus and reduces their consumer surplus. To maximize profits, firms will set the price where marginal cost equals marginal revenue (MR=MC). The second condition is that the companies must divide the market into distinct sections and keep them unique and prevent the consumers who purchased the products at a lower price from tending to resell them to others at a higher price. Segmentation means that consumers in one market cannot resell the good to others in another market. Price discrimination will not be effective if exchanges between groups are possible. Those who pay a higher price cannot buy from those who pay middle of paper...... a given flight at the time they book it. However, British Airways initially sells at a premium, with price discrimination across different classes. Prices will then be significantly reduced for seats sold closer to departure time. British Airways always tries to fill all the seats in the finale. During this competition between budgets and within airlines, consumers can benefit from a competitive market as prices are lower and even more choices are up for grabs. In conclusion, firm price discrimination mainly depends on the type of firm. I agree that companies could be more price discriminating, especially shipping companies. As a result, they could better utilize the distribution of resources and lead to a more socially efficient environment, which would increase the social well-being of the whole society..