3rd degree price discrimination (Score 2, Informative)

This practice is called third degree price discrimination. Basically it indicates that an economist working for the company has separated the market into two or more segments. Through studies, they have determined that the price elasticity of demand is different in each of these segments. (this means that a 1 percent change in price in each of these markets will produce different changes in demand for the product). Because of this, it is possible to maximize profits by selling the product in the two different markets for different prices. (since firms sell at the price where marginal revenue is equal to the marginal cost of producing one more unit of the good, it is to their benefit to separate this marginal revenue for the two different markets, as the market that will accept the higher price will increase profits significantly.) An example economists like to give is selling goods at an airport. People are willing to pay more for the equivalent good at an airport for the convenience of having that good now, while they wait for their plane.