Nonlinear price discrimination
A)sets the price consumers pay based on quantity purchased.
B)is where the firm sets prices in geometrically or exponentially decreasing price points.
C)is used in situations where consumers have no reservation prices.
D)eliminates deadweight loss.

Question

Quizplus · Accepted Answer

Nonlinear price discrimination sets different prices for different quantities purchased by a particular consumer. This is known as quantity discrimination, which is a form of nonlinear price discrimination. The goal is to capture more of the consumer surplus by offering lower prices to consumers who are willing to buy more. This method can be used in situations where different consumers have different reservation prices, but it sets prices based on quantity rather than reservation price. Nonlinear price discrimination does not necessarily eliminate deadweight loss; it can reduce it, but it depends on the specific market conditions and pricing strategy. Choice B is incorrect because geometric or exponential pricing is a specific pricing strategy, but it does not necessarily imply nonlinear price discrimination. Choice C is incorrect because nonlinear price discrimination can be used when consumers have reservation prices, and it does not require that consumers have no reservation price.

Nonlinear Price Discrimination