Many supermarkets provide regular shoppers with “loyalty cards." By using the card when checking out, a shopper receives reduced prices on a few goods, and the supermarket compiles information on the shoppers’ purchases. Some supermarkets have switched from giving the same price reductions to all shoppers to giving some shoppers coupons that depend on a shopper's history. A manager at one supermarket that uses this approach said, "It comes down to understanding elasticity at a household level." Why would making the availability of coupons depend on a shopper's buying history involve “understanding elasticity at a household level?" What information from a shopper's buying history would be relevant in predicting the shopper's response to a price discount? 55

Many supermarkets provide regular shoppers with “loyalty cards." By using the card when checking out, a shopper receives reduced prices on a few goods, and the supermarket compiles information on the shoppers’ purchases. Some supermarkets have switched from giving the same price reductions to all shoppers to giving some shoppers coupons that depend on a shopper's history. A manager at one supermarket that uses this approach said, "It comes down to understanding elasticity at a household level." Why would making the availability of coupons depend on a shopper's buying history involve “understanding elasticity at a household level?" What information from a shopper's buying history would be relevant in predicting the shopper's response to a price discount? 55

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter10: Monopolistic Competition And Oligopoly

Section: Chapter Questions

Problem 16CTQ: Would you rather have efficiency or variety? That is, one opportunity cost of the variety of...

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1. If the firms in a monopolistically competitive marketare earning economic profits or losses in the short run,would you expect them to continue doing so in the longrun? Why? 2. Is a monopolistically competitive firmproductively efficient? Is it allocatively efficient? Whyor why not? 3. What stops oligopolists from acting together asa monopolist and earning the highest possible level ofprofits?
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What is the relationship between product differentiation and monopolistic competition?
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