You own a popular company and only sell 1 product. You plan to incorporate price discrimination. Your research shows a lot of people would buy at $2000. a lot more people would buy the product at $500, but not at $2000. Your marginal cost per unit is $10O. To maximize profit, you decide to set the price at $2000 and buy billboards across your market advertising a weekly sale: the price will be $500 on Tues, Wed, and Thurs from 12pm to close. a) Is this likely to achieve a goal of perfect price discrimination? Why or why not? b) Can you suggest any better way of executing your optimal pricing strategy?

You own a popular company and only sell 1 product. You plan to incorporate price discrimination. Your research shows a lot of people would buy at $2000. a lot more people would buy the product at $500, but not at $2000. Your marginal cost per unit is $10O. To maximize profit, you decide to set the price at $2000 and buy billboards across your market advertising a weekly sale: the price will be $500 on Tues, Wed, and Thurs from 12pm to close. a) Is this likely to achieve a goal of perfect price discrimination? Why or why not? b) Can you suggest any better way of executing your optimal pricing strategy?

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter17: Making Decisions With Uncertainty

Section: Chapter Questions

Problem 6MC

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