Third-degree price discrimination occurs when a seller charges different prices to two or more consumer groups with different demand elasticities. The classic examples are student and senior discounts – a firm offers a discount on their product to capture the segments which is generally more sensitive to changes in price. This cut in price causes an increase in demand and potentially in a firm's revenue.

One can find evidence of price discrimination in many industries. In the airline industry, companies price discriminate by attaching various restrictions to cheaper tickets, thereby making them unattractive to consumers with a high valuation of time or convenience and low price elasticity. In the entertaining industry, nightclubs use price discrimination when they charge different prices to males and females.