What is price discrimination?

Price discrimination refers to the practice of a firm charging different prices for the same product or service in different markets or segments. This strategy allows firms to maximize their profits by capturing consumer surplus—where consumers are willing to pay more than the market price—and essentially enables them to charge higher prices to those who are less price-sensitive while offering lower prices to more price-sensitive consumers.

In the context of the correct answer, when a firm sells the same goods in different markets at different prices, it often takes into account factors such as location, time of purchase, or the characteristics of the buyer, which can influence their willingness to pay. This method can lead to increased sales and profit margins, as it allows the firm to cater to different sets of consumers based on their purchasing behavior.

The other choices do not accurately describe price discrimination. Selling products at a uniform price indicates a lack of pricing variation, which is contrary to the concept. Collaboration to reduce prices suggests an agreement between firms to lower prices, known as price fixing, rather than adjusting prices based on consumer segments. Lastly, while adjusting prices based on demand can indicate a responsive pricing strategy, it does not specifically capture the essence of price discrimination, which revolves around differentiated pricing across various markets for the same good.