181
Students have low incomes, so high
prices effectively bar them from doing
or buying certain things. Student
discount rates bring activities and
goods within an affordable range.
See also: Markets and morality 22–23 ■ Effects of limited competition 90–91 ■
Monopolies 92–97 ■ The competitive market 126–29 ■ Efficient markets 272
WAR AND DEPRESSIONS
Arthur Pigou (p.336). First degree
discrimination is the model that
Dupuit used: a firm charges each
individual the maximum he or she
is willing to pay. In practice this is
rare because it requires the seller
to know every individual’s valuation
of the good.
Second degree discrimination
involves reducing the price for each
additional unit that is bought. This
option is often used in supermarket
deals, in offers such as “buy one
bottle of soda and get the second
for half price.”
Third degree discrimination,
which is probably the most
common form, involves identifying
customers by their differing
characteristics. Movie theaters, for
example, offers cheaper tickets for
children and senior citizens.
Discriminatory effects
In her 1933 book The Economics of
Imperfect Competition, the British
economist Joan Robinson looked at
the results of price discrimination
on society. Most customers
instinctively think that price
discrimination in all three forms is
unfair. If each bottle of soda costs
the same to make, why doesn’t
the supermarket sell the first bottle
at the low price too? How can some
movie tickets be cheaper? We
interpret these offers as meaning
that a monopolist is increasing
its profits at the expense of most
of its consumers.
Robinson found that if the
monopolist produces the same
output but charges higher prices
to certain people, then consumers
do lose out. However, sometimes
price discrimination can allow
people to do things they could
not otherwise afford. When rail
companies price discriminate, for
instance, commuters in peak times
are charged higher prices, but in
off-peak periods it makes sense for
the firm to set much lower prices,
because they need to encourage
people to take a train. So even
though some consumers pay
more, a larger number may find
themselves able to travel at
the lower price. In this way it is
possible for consumers in total to
benefit when firms set different
prices to different people. ■Joan Robinson
Born in 1903 into a wealthy
English family, Joan Violet
Robinson (née Maurice) is
considered to be the greatest
female economist of the 20th
century. She was educated at
St Paul’s Girls’ School, London,
and studied economics at
Cambridge University. She
married young and then
traveled to India for two years
before returning to Cambridge
to teach. Here, she became
part of a team around John
Maynard Keynes that included
economist Richard Kahn, with
whom she formed a lifelong
intellectual partnership.
Robinson enjoyed traveling,
and lectured abroad widely
until her 70s—she was
familiar to students in North
and South America, Australia,
Africa, and most of Europe.
An original thinker who was
unafraid of controversy, she is
said to be the best economist
never to win the Nobel Prize.
She died at the age of 80.Key works1933 The Economics of
Imperfect Competition
1937 Essays on the Theory
of Unemployment
1956 The Accumulation
of CapitalPrice discrimination is
the act of selling the same
article produced under single
control at a different price
to the different buyers.
Joan Robinson