ABSTRACT
Chapter 8 explains how a seller with market power should set prices to maximize profit. Uniform pricing sets the same price for every unit of the product. It is the simplest to administer but least profitable as it leaves buyers with buyer surplus and does not deliver the economically efficient quantity. At the other extreme, complete price discrimination sets a different price for each unit of the product. It is the most difficult to administer but the most profitable as it leaves buyers with zero buyer surplus and delivers the economically efficient quantity. Less profitable but easier to administer is direct segment discrimination. It sets different incremental margins for each identifiable segment. Still less profitable but easier to administer is indirect segment discrimination. It structures a choice for buyers so as to earn different incremental margins from each segment. Technology both facilitates and hinders price discrimination.
