In a market characterized by collusion, how might firms utilize price discrimination to maximize their profits, particularly in real-world examples such as airlines or telecommunications?

In a market where firms collude, they agree to set prices high to increase their profits, rather than competing against each other. Price discrimination is a strategy they can use to charge different prices to different customers based on their willingness to pay. For example, airlines often charge higher prices for last-minute tickets because they know business travelers are less sensitive to price changes and need to fly urgently. This allows the airline to maximize profits from those who can afford to pay more while still filling seats with cheaper tickets for leisure travelers. By using price discrimination in a collusive market, firms can effectively capture more consumer surplus and increase their overall profits.