Is first degree price discrimination efficient?
Keeping this in consideration, is first degree price discrimination Pareto efficient?
1st degree price discrimination occurs when each good is sold to the consumer with the highest reservation price for it. So 1st degree price discrimination is Pareto efficient because the only way to make consumers better off (increase consumer surplus) is to make producers worse off (decrease producer surplus).
One may also ask, is perfect price discrimination efficient? Price discrimination allows a firm to sell at a much higher output. Therefore it is making use of its previous spare capacity. This allows the firm to be more efficient with its factors of production. The increased output allows the firm to have lower long run average costs, further achieving greater profits.
Secondly, what is 1st degree price discrimination?
First-degree price discrimination, alternatively known as perfect price discrimination, occurs when a firm charges a different price for every unit consumed. The firm is able to charge the maximum possible price for each unit which enables the firm to capture all available consumer surplus for itself.
What is successful price discrimination?
Price Discrimination occurs when a firm sells a good or service to different buyers at two or more different prices, for reasons not necessarily associated with cost.