capturing consumer surplus - in competitive market, only 1 price set  

• some consumers willing to pay more than that set price
• firm would make more money if they could charge people closest to what they're willing to pay

1st degree price discrimination - charging each consumer a different price  

• results in no consumer surplus
• each consumer charged exactly what he/she is willing to pay
• marginal revenue no longer comes into play in deciding market price
• aka perfect price discrimination >> clearly no possible
  • firms can't possibly know what each person is willing to pay

2nd degree price discrimination - charges different price for different quantities  

• willingness to buy decreases as quantity increases
• firms may offer bulk sales at a lower per-unit price

3rd degree price discrimination - divides consumers into groups  

• each group gets charged a different price
  • ie. movie tickets for children, adults, students, seniors
• marginal revenue should be equal for each group
• MR1 = MR2 = MC
• P1 / P2 = (1+E2) / (1+E1)
• possible where it's not profitable to sell to a certain group

intertemporal price discrimination - charging different prices at different times  

• divides consumers into those who must have the good immediately and those who are willing to wait (elastic/inelastic division)
• peak-load pricing - increasing prices when marginal costs get higher due to limits in capacity (ie. electricity during summer, heating during winter)