Page "Monopoly" Paragraph 70

MC.

Pindyck and Rubinfeld p. 398 – 99 .</ ref > Generally the company charges a higher price to the group with a more price inelastic demand and a relatively lesser price to the group with a more elastic demand.

Examples of third degree price discrimination abound.

Airlines charge higher prices to business travelers than to vacation travelers.

The reasoning is that the demand curve for a vacation traveler is relatively elastic while the demand curve for a business traveler is relatively inelastic.

Any determinant of price elasticity of demand can be used to segment markets.

For example, seniors have a more elastic demand for movies than do young adults because they generally have more free time.

Thus theaters will offer discount tickets to seniors.