Price Discrimination
Plain definition
Charging different customers different prices for the same good, not based on cost differences.
In economics
Price discrimination converts consumer surplus into profit: first-degree (each buyer pays their maximum), second-degree (quantity or version tiers), and third-degree (segmented groups like students vs. adults). It requires market power and the ability to prevent resale, and — unlike uniform monopoly pricing — it can raise total output and even efficiency.
Example
Airlines charge business travelers more than leisure travelers for the same seat, and cinemas offer student discounts — both are third-degree price discrimination.
Price discrimination is confused with predatory pricing. Discrimination means different prices to different buyers at the same time; predatory pricing means pricing below cost to drive out rivals. Ordinary sales, coupons, and student discounts are price discrimination, not predation.