Price discrimination is based on self-selection:
A) when a firm can distinguish consumers with a high versus low willingness to pay.
B) when a firm offers a menu of alternatives, designed so that different customers will make different choices based on their willingness to pay.
C) when a monopolist knows perfectly the customer's willingness to pay for each unit its sells and can charge a different price for each unit.
D) when monopolists decide for themselves whether to engage in price discrimination.

Question

Quizplus · Accepted Answer

Price discrimination based on self-selection occurs when a firm offers a menu of alternatives, designed so that different customers will make different choices based on their willingness to pay. This allows the firm to charge different prices to different segments of the market without having to directly determine each customer's willingness to pay. The customers self-select based on their preferences and budgets, allowing the firm to capture more consumer surplus and increase profits.

Price Discrimination Is Based on Self-Selection