Third-degree price discrimination is a pricing strategy where a seller charges different prices to different groups of consumers for the same good or service, based on their willingness to pay. This approach allows firms to maximize profits by capturing consumer surplus from various market segments, thus reflecting the distinct elasticities of demand across those segments. By identifying and segmenting consumers based on characteristics like age, location, or purchase timing, sellers can effectively optimize revenue while maintaining market power.
congrats on reading the definition of third-degree price discrimination. now let's actually learn it.