Question

 

A.        Price discrimination is one way firms who have monopoly power can attempt to build their profits even further. Briefly discuss two or three examples of price discrimination that were discussed in class and identify how firms' ability to separate consumers into two or more groups is critical in their efforts to build profits.

B.        In the Beer Game, we experienced the impact of long supply chains and hidden information on logistics costs and customer service. Explain how modern firms can modify their production and distribution processes to minimize the bullwhip effect caused by uncertain customer demand and supply chain communications. Identify some of the adverse financial consequences of failing to control inventories and backorders.

C.        One of the most controversial subjects in the Freakonomics books is the connection Levitt & Donohue drew between abortion policy and violent crime. Please describe how the authors contrast the experiences of Romania and the United States and tell why they believe these different histories help support their claims.

Answer 1

Price discrimination is used when producers sell the same good while charging the different price. Companies use price discrimination to maximise their revenue . A producer will charge a higher price when demand is inelastic that's mean consumers don't have much available option in market. Producers will charge less price when demand is elastic that's mean consumers have different available option . If they will charge high price to consumers so consumers can shift their demand on another substitute.

Degrees of price discrimination  

1. First degree price discrimination : Monopoly charge different price for same commodity to maximize their profit.

2. Second degree price discrimination: Monopoly charge different price on the basis of quantity purchased by consumers.

3. Third degree price discrimination: Monopoly charge different price in different market .

Examples. 1 Monopoly charge different price for one movie based on gender, show timing , and days to maximize their revenue .

2. A monopoly can provide the coupon to their consumers in retail market. They produce the coupon to increase their demand . Because people will attract their coupon policy and will purchase more. In that matter producer will charge high price for the sake of providing coupons.

3.Airlines industry also charge price discrimination . They sell their tickets in different market at different rate . They provide the tickets price on the basis of time,city,day or night,. They also charge price discrimination on the basis of providing coupon,membership cards.