Question

1) A popular restaurant when I attended A&M was Double Dave’s. On Wednesdays, they had an “all you can eat night” with pizza, pepperoni rolls, and beer. The price was $6 for men and $5for women (1985).

Economist Bob says this is NOT price discrimination? What might be his logic? Explain fully.

Economist Ray says this IS price discrimination? What might be his logic? Explain fully.

2) For those who have a land telephone line, there is an interesting long-distance pricing strategy. The lowest rates are 11pm to 8am and the highest rates are 8am to 5pm. Is this price discrimination? Write a paragraph explaining and justifying your answer.

Answer 1

1.

a) The economist Bob might have a perception about the quantity of food and the price for it, the men are likely to eat more than the women. So it will be benefical for the restaurant to set a low price for the foods than the men, this might be his logic.( the price is set the quanitity of food intake.

b) According to Ray, this might be a price discrimination on the different groups of people, the groups are created on the basis of gender.

2. Yes this might be a price discrimination based on the time, there should be a high network traffic during 8am to 5pm so the company decided to charge a price on these high traffic times. By doing this they can increase their quality of service, by charging a high price during these time allows the company to reduce the network traffic and provide a better experience to their customers. So in the times of relatively less network traffic they charge a very low price. By doing this they can get more customers at this time.