"First of all, what exactly is 3rd degree price discrimination? In general it could be defined as a situation when a 'firm sells the same good to different customers for different prices, even though the costs of producing for the two customers are the same' (Mankiw, 2012). In other words a firm is trying to maximize their profit by charging more to people who have a higher willingness to pay rather than charging according to their production costs. For this to be possible, that particular firm has to have a ‘monopoly power’ (Zangelidis, 2013) but also ‘ability to separate customers according to their willingness to pay’ (Mankiw, 2012). In practice it is used by all kinds of markets, such as travel markets (buses, trains, airplanes), entertainment markets (cinemas, theatre) but also in a market so common you would not expect it and that is book market. That is also an example I am going to use to provide a better picture of how 3rd degree price discrimination works.

Let’s say that Bloomsbury just bought rights to sell the sixth Harry Potter book and their initial cost is £40 million and there are no additional ones. The book will appeal to two target groups, there are die-hard fans, called Potterheads, who do not care about how much the book costs and are willing to pay up to £40 for the new book and then there are less enthusiastic fans who do want to read the book but it is not essential for them and are only willing to pay £8 for it. Potterheads will want to read it as soon as it comes out and are willing to pay more to get it as soon as possible. Let’s assume that Bloomsbury knows exactly how much both groups are willing to pay and that it is also aware of the novelty advantage. Logically, Bloomsbury will want to charge the maximum amount customers are willing to pay, which in this case is £40 and £8. The research shows that there are 25 million Potterheads and 40 million of ‘normal fans’. If Bloomsbury had no price discrimination, it could either sell the books for £40 and make £960 million profit or they could sell the book for £8 and make £480 million. In this case they would rather sell it to Potterheads only but then there is £320 deadweight loss (Mankiw, 2012).
So how should Bloomsbury maximize their profit and get rid of the deadweight loss? The solution is quite clear, all it needs to do is price discriminate. The easiest way would probably be to charge £40 for a hardback cover for the first month of release and then maybe publish a paperback cover version for £8. Apparently the production cost difference between two cover versions is definitely not as significant as the price difference but this is actually quite common marketing move publishers use. If Bloomsbury would in fact follow the strategy as suggested it would gain £1280 million profit."

University of Aberdeen, UK, práce obsahuje tři grafy