Question

First-time subscribers to the Economist pay a lower rate than repeat subscribers. Is this a case of price discrimination? If so, of what type? This is an example of price discrimination by indicators (also known as third-degree price discrimination). The market is segmented into new subscribers and repeat subscribers. New subscribers, know the product less well and are thus likely to be more price sensitive. Moreover, the fact that they have not subscribed in the past indicates that they are likely to be willing to pay less than current subscribers. It is therefore optimal to set a lower price for new subscribers.

          First-time subscribers to the Economist pay a lower rate than repeat subscribers. Is
this a case of price discrimination? If so, of what type?
This is an example of price discrimination by indicators (also known as third-degree
price discrimination). The market is segmented into new subscribers and repeat subscribers. New subscribers, know the product less well and are thus likely to be more
price sensitive. Moreover, the fact that they have not subscribed in the past indicates
that they are likely to be willing to pay less than current subscribers. It is therefore
optimal to set a lower price for new subscribers.

Added by Cameron B.

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