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- what you say you're gonna do
- "cheap talk"
what you actually did despite what you said
1st degree price discrimination
- ideally, a firm charging a price equal to each consumer's WTP
- captures 100% of consumer surplus
- ex. like an auction
2nd degree price discrimination
- firms charge different prices per unit for different quantities purchased
- ex. combo discounts at fast food places
3rd degree price discrimination
- charge different prices to different groups of consumers
- ex. student discounts, early bird dinners