Question

3) On July 21, of 2007 the final book of the Harry Potter series was released. But, only the hardback book was available. Several weeks later, the paperback version was made available. Can you explain this based on price discrimination? Write a paragraph explaining your logic.

4) Consumers of the Harry Potter books (at some point) had a choice between hardback and paperback. The hardback books were around $19.95 and the paperback books were around $8.25. Is this price discrimination, why or why not? Write a paragraph explaining your position.

5) Many big cities offer public transportation networks. Usually there is a monthly pass that can be purchased by locals. However, people can also buy a one-day pass…but it is far more expensive than 1/30^th of the monthly price. Is this price discrimination? Write a paragraph fully explaining your logic.

6) In Dallas, the Sunday newspaper costs significantly more than the weekday paper…about 3 times as much…but it is a little bigger. Is this price discrimination? Write a paragraph explaining your answer.

7) In many European cities, tourists are charged one price to enter parks, exhibits, museums, etc. and locals are charged a lower price. Might this tie into price discrimination in some way? Write a paragraph explaining your answer.

Answer 1

3) Price discrimination is usually the practice of charging di erent prices to different consumers for the same product. In its purest form, first degree price discrimination, is each consumer is charged depending on his willingness to pay. Publishers use publication time and binding quality as ways of discriminating among consumers with hetereogeneous valuations of those attributes. They typically publish a new title in hardcover format first, then follow it up with a paperback version several months (or even years) later.Either way, there is a large price differential between hardcover and paperback. This practice of introducing an inferior version of an established product is quite common. Those who want to buy a book as soon as it comes out want the book more than those who just want to read it eventually; by releasing the hardcover first, the publisher can extract a lot of value from impatient readers. Meanwhile, patient readers aren't turned off by the high price because they can eventually buy it at a more reasonable price later. By offering hardcovers first, the publisher segments its customers and can offer a higher price to those with higher demand As long as the hardcover is selling reasonably well, they don’t release the paperback. They assume that hardcover sales will dry up once the paperback is released.The reason they charge more is that some consumers are willing to pay more for earlier access to the book they want to read. On July 21, of 2007 the final book of the Harry Potter series was released. But, only the hardback book was available. Several weeks later, the paperback version was made available.Same was to track profit from the customers who willingly buy the costly hardback version as long as it is bringing more profit and few backs later releasing the paper back version to increase the customer base by introducing a low cost version.