<Li> Have market power </Li> <P> There are three different types of price discrimination which revolve around the same strategy and same goal--maximize profit by segmenting the market, and extracting additional consumer surplus . </P> <Ul> <Li> First - degree price discrimination <Ul> <Li> The business charges every consumer exactly how much they are willing to pay for the product . </Li> </Ul> </Li> <Li> Second - degree price discrimination <Ul> <Li> The business uses volume discounts which allows buyers to purchase a higher inventory at a reduced price . While this benefits the high - inventory buyer, it obviously hurts the low - inventory buyer who is forced to pay a higher price . This buyer may then be less competitive in the downstream market . </Li> </Ul> </Li> <Li> Third - degree price discrimination <Ul> <Li> This occurs when firms segment the market into high demand and low demand groups . </Li> </Ul> </Li> </Ul> <Li> First - degree price discrimination <Ul> <Li> The business charges every consumer exactly how much they are willing to pay for the product . </Li> </Ul> </Li>

A company frequently sells products at a price below inventory cost