Examples of price discrimination Complete the following table by determining whether or not each scenario is an example of price discrimination. Hint: To determine whether a scenario is an example of price discrimination, think about whether the market can be segmented into two groups that pay different prices for the same good. Scenario Price Discrimination Yes No Every year, Lesspay ShoeSource promotes its giant BOGO sale—buy one pair of shoes and get one half off—through commercials and other means of advertising. Note that the price of one pair of shoes is the regular retail price, so a customer must buy two pairs of shoes to receive the discount. Horizon Wireless offers various features "à la carte" that a customer may add to his or her calling plan, such as a text messaging package, a data package, and an Internet package.

Examples of price discrimination Complete the following table by determining whether or not each scenario is an example of price discrimination. Hint: To determine whether a scenario is an example of price discrimination, think about whether the market can be segmented into two groups that pay different prices for the same good. Scenario Price Discrimination Yes No Every year, Lesspay ShoeSource promotes its giant BOGO sale—buy one pair of shoes and get one half off—through commercials and other means of advertising. Note that the price of one pair of shoes is the regular retail price, so a customer must buy two pairs of shoes to receive the discount. Horizon Wireless offers various features "à la carte" that a customer may add to his or her calling plan, such as a text messaging package, a data package, and an Internet package.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter14: Monopoly

Section: Chapter Questions

Problem 14.12P

See similar textbooks

Similar questions

Question#5Nile.com, the online bookseller, wants to increase its total revenue. One strategy is to offer a 10% discount on every book it sells. Nile.com knows that its customers can be divided into two distinct groups according to their likely responses to the discount. The accompanying table shows how the two groups respond to the discount. Group A Group B(sales per week) (sales per week) Volume of sales beforethe 10% discount 1.55 million 1.50 million Volume of sales afterthe 10% discount 1.65 million 1.70 million Using the midpoint method, calculate the price elasticities of demand for group A and group B.Explain how the discount will affect total revenue from each group.Suppose Nile.com knows which group each customer belongs to when he or she logs on and can choose whether or not to offer the 10% discount. If Nile.com wants to increase its total revenue, should discounts be offered to group A or to group B, to neither group, or to both groups?
6.10. SpokenWord. Your software company has just completed the first version of Spo- kenWord, a voice-activated word processor. As marketing manager, you have to decide on the pricing of the new software. You commissioned a study to determine the poten- tial demand for SpokenWord. From this study, you know that there are essentially two market segments of equal size, professionals and students (one million each). Profes- sionals would be willing to pay up to $400 and students up to $100 for the full version of the software. A substantially scaled-down version of the software would be worth $50 to consumers and worthless to professionals. It is equally costly to sell any version. In fact, other than the initial development costs, production costs are zero. Although you know there are two market segments, you cannot directly identify a consumer as belonging to a specific market segment. (a) What are the optimal prices for each version of the software? Suppose that, instead of the…
17. How can the elasticity of demand help in pricing strategy? Explain.
3. Using the midpoint method The following graph shows two known points (X and Y) on a demand curve for tomatoes. 0102030405060708090100109876543210PRICE (Dollars per pound)QUANTITY (Thousands of pounds of tomatoes)DemandXYSlope: -0.05 According to the midpoint method, the price elasticity of demand for tomatoes between point X and point Y is approximately (0.05 / 0.2 / 0.25 / 5) , which suggests that th demand for tomatoes is (elastic / inelastic ) between points X and Y.
Another strategy Alex can increase his economic profit is to set an all-or-nothing price lower than the monopoly price. The all-or-nothing pricing strategy requires a consumer to buy all the apples at a given price. If Alex sets the all-or-nothing price at $6.25, calculate the economic rent andconsumer surplus under all-or-nothing pricing for different quantities. What is the optimal all-or- nothing quantity Alex should sell to maximize economic profit?
Title The demand function for bicycles in Holland has been estimated to be Q = 2,000 + 15Y – 5.5P... Description The demand function for bicycles in Holland has been estimated to be Q = 2,000 + 15Y – 5.5P where Y in income in thousands of euros, Q is the quantity demanded in units, and P is the price per unit. When P = 150 euros and Y = 15(000) euros, determine the following: a.Price elasticity of demandb.Income elasticity of demand
4) Provide a simple definition of the price elasticity of demand and explain why knowing the price elasticity for her product is useful to the firm's manager.
3.) Elasticity Price elasticity of demand is the responsiveness of quantity demanded to price changes. The price elasticity of demand has two functions: it measures the responsiveness of demand to a change in price; and, it informs the firm whether an increase in price will increase or decrease its total revenue. Governments and courts use elasticity to measure the responsiveness of demand to price changes. Firms use elasticity to decide the price of their products or whether to add new product models. First, briefly explain the three basic attributes of the elasticity formula. In doing so, be certain your answer includes an illustration of the formula for calculating price elasticity of demand as well as a definition for the perfectly elastic demand curve, perfectly in elastic demand curve and the unit elastic; Next, briefly explain effect of price elasticity of demand on total expenditure and its effect on total revenue; Then, briefly list the determinants of demand elasticity; and…
Please solve Fast i give 2 like The managers of Movies Plus, a large movie theater, want to practice third-degree price discrimination. The managers have learned that college students have an own price elasticity of demand of 1.5 for tickets at Movies Plus and adults have an own price elasticity of 1.2. If the managers have correctly determined the third-degree profit-maximizing price for adults is $15, what is the third-degree profit-maximizing price to charge students? Group of answer choices (1)$13.50 (2)$10.00 (3)$7.50 (4)$8.50
The diagram below shows a demand line (green) and revenue curve (red) for a certain good. The horizontal axis is price in £. For the demand line, the vertical axis gives the number of units sold. For the revenue curve, the units of the vertical axis are £. Explain briefly how you can tell just by looking at the graphs that I must have gone wrong plotting the revenue curve, find the equation of the green line, the demand ? in terms of price, the correct equation of the revenue curve and the maximum revenue.
Q.4 a) What can be said about the price elasticity of demand in each of the following statements? i) “The Tikka delivery business in this town is very competitive. I’d lose half my customers if I raised the price by as little as 10%.” ii) “My economics professor has chosen to use the Mankiw textbook for this class. I have no choice but to buy this book.” iii) “I always spend a total of exactly Rs.1000 per week on coffee.” b) A news website reported (Feb. 17, 2020) that ridership of Karachi Metro Bus declined after a fare increase: “There were nearly four million fewer riders in December 2019, the first full month after the price of a token increased Rs. 25 to Rs.150, than in the previous December, a 4.3 percent decline.” i) Use these data to estimate the price elasticity of demand for Karachi Metro Bus. ii) According to your estimate, what happens to the Karachi Metro Bus’s revenue when the fare rises? iii) Why might your estimate of the elasticity be unreliable?
4. You have been hired as a consultant to estimate the demand for various brands ofcoffee in the market. You are provided with annual price data for two years by U.S.state and the quantities sold. You want to estimate a demand function for coffeeusing this data. What problems do you think you will encounter if you estimatedthe demand equation by OLS?