What is second degree price discrimination

Explanation

In the second-degree price discrimination, the ability to gather information on every potential buyer is not present. so Instead, companies price products or services differently based on the preferences of various groups of consumers.

Often, businesses apply second-degree price discrimination through quantity discounts; for customers who buy in bulk receive special offers not granted to those who buy a single product. This type of pricing strategy is used most often in warehouse retailers, such as Sam's Club or Costco (COST), but it can also be seen in companies that offer loyalty or rewards cards to frequent customers.

Second-degree price discrimination does not altogether eliminate consumer surplus, but it does allow a company to increase its profit margin on a subset of its consumer base.