In the US, this practice is prohibited by the Robinson-Patman Act when it causes “primary line” competitive injury across state borders. Marcel Boiteux (“bwah-TUH”) built upon Frank Ramsey’s finding that this practice may maximize social welfare. The two-part tariff is an example of this practice in which a product has both lump-sum and per-unit components. The third-degree version of this practice relies on an exogenous signal to segment a market. When this practice is performed perfectly, deadweight loss and consumer surplus are eliminated. This practice usually disadvantages consumers with lower elasticities of demand. For 10 points, name this practice exemplified by senior discounts, in which a firm charges different amounts to different customers. ■END■
ANSWER: price discrimination [prompt on differential pricing; prompt on predatory pricing]
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