Many industries practice price discrimination, such as the entertainment industry, consumable goods industry and client services. Each of these industries provides a good example of the three types of price discrimination, which is the act of charging different prices for the same good or service.
The entertainment industry practices third-degree price discrimination. Different consumer groups are charged different prices for the same good. If a consumer pays $15 for a movie ticket, and their elderly grandparent pays just $8 for the same ticket, the consumer is experiencing third-degree price discrimination. The senior consumer group is charged less than the average consumer for the same ticket.
The consumable goods industry practices second-degree price discrimination when different prices are charged based on the quantity purchased. If a consumable good costs $10, but a quantity discount is offered to consumers who purchase 10 or more units, they would be experiencing second-degree price discrimination.
Finally, many industries involving client services practice first-degree price discrimination, where a company charges a different price for every good or service sold. When a service is offered to a client, the price is often based on the value it brings to that client and the amount the client can pay. If a management training company works with IBM, for example, it would charge far more for the same services than it would if working with a small business owner. This type of price discrimination is also known as perfect price discrimination, as a company can capture 100% of the consumer surplus.