Peak-load pricing is when a firm charges a different price during the peak (e.g.,highest demand)period than during off-peak times,because the marginal cost of providing the good or service during the peak is higher.For example,an electricity producer builds generating capacity to serve peak-period demand but only needs to call on this full capacity during a handful of days of the year.Building capacity to meet peak demand means that there is a discrete change in the marginal cost of providing the good or service across a binding capacity constraint.Is this an example of price discrimination? If so,to which degree? If not,explain why not.

Question

Quizplus · Accepted Answer

Peak-load pricing is not considered price discrimination because it reflects a change in the marginal cost of providing the service during different times (peak vs. nonpeak periods), rather than charging different prices to different consumers for the same product or service.

Peak-Load Pricing Is When a Firm Charges a Different Price