Read the article “Nintendo Slashes U.S. Price of GameCube,” published in the New York Times, September...

Read the article “Nintendo Slashes U.S. Price of GameCube,” published in the New York Times, September 24, 2003. What type of price discrimination was applied by the company? What were the available conditions that made the discrimination possible?

Solutions

Expert Solution

The Nintendo Company ltd. is a Japanese multinational consumers electronic and video gaming company

This video game giant slashed the price of its GameCube video game from $150 to $99.99 in Norh America. This step was taken by the company in order to uincrease the market share in US by appealing to mass market consumers and potential consumers looking for a second console.

THIS STEP TAKEN BY NINTANDO IS TERMED AS THIRD DEGREE PRICE DISCRIMINATION.

Third degree price discrimination

It is a strategic policy of a monopolist to charge different price of its product in different markets on the basis of price elasticity of demand.

Under this method, the company charges higher price in the market where demand is inelastic, while charges lower price in the market where demand is elastic.

Available conditions that made NINTANDO the discrimination possible

 * The NINTANDO company held the position of a monopolist in the video gaming market

* The US consumer group is more sensitive to price change ,it happens because in US price elasticity of demand in respect of gaming is greater than one,which means ,a little drop in price brings about a big increase in sale volume

* As the demand is elastic in US, it will be beneficial to the company to grab market share in US, especially North America

Rahul Sunny answered 2 years ago

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