. As manager, you have decided that it’s time for some price discrimination to b
ID: 1162661 • Letter: #
Question
. As manager, you have decided that it’s time for some price discrimination to benefit your firm. There are typically three different “degrees” of price discrimination to choose from. Describe each “degree” of price discrimination, and then explain the specific “degree” you would use that has the greatest applicability to a range of goods that consumers typically purchase from your firm.
Again, no hedging your bet. :-) Select only one specific degree. Do not select more than one degree or combinations of degrees.
Explanation / Answer
Price discrimination is the concept of pricing differently for the same set of products/services offered to different segments of the market,identified as
sub-markets based on various factors such as Domestic/industrial use ; Urban/rural population ; Adults/kids etc;
The sub-markets classification for price discrimination is only significant if they have relatively different price elasticities of demand. Consumers in the relatively inelastic sub-market are charged a higher price, whereas those in the relatively elastic sub-market are charged a lower price.
There are typically three different “degrees” of price discrimination to choose from.
First-degree discrimination occurs when a company charges the maximum possible price for each unit consumed. Since the price varies from unit to unit,
the firm captures all the consumer surplus to itself. And such a discrimination is very rarely practised.
Second-degree price discrimination occurs when a company charges a different price for different quantities consumed, such as providing discounts on bulk purchases by the consumer.
This leads to the wholesale/retail markets.
Third-degree price discrimination is when a company charges a different price to different consumer groups which are classified based on age,sex,creed etc;This type of discrimination is the most common.
For the range of products my firm has ,which are mostly consumer perishables ,Third-degree price discrimination is of greatest applicability because it is not defined a single criterion like the order two degrees and so can be subjected to any set of rules and experimentation/trials.
It also caters to a much wider demographics unlike the other two degrees. It also requires the active involvement of management in price monitoring due to the nuances it has and the sensitivity and responsiveness of the domain it caters to.
IF YOU LIKED MY ANSWER TO YOUR QUESTION, PLEASE SUPPORT ME WITH A THUMBS UP, FEEL FREE TO POST A COMMENT .T.H.A.N.K. Y.O.U.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.