Question

In: Economics

Answer the following questions: Why do some firms practice price discrimination? Why do other firms practice...

Answer the following questions:

  1. Why do some firms practice price discrimination? Why do other firms practice price non-discrimination?
  2. Describe the differences between price non-discrimination and (i) first degree price discrimination, (ii) second degree price discrimination, (iii) third degree price discrimination, and (iv) peak load pricing. Provide a supporting example in each of these four cases. Note the market structure conditions in which each can apply, and explain the expected welfare outcomes in each case.

Solutions

Expert Solution

Price Discrimination:- Price discrimination is a selling plan that charges customers different prices for the same product or service depends on what the seller thinks they can get the customer to accept. In true price discrimination, the seller charges each customer the topmost price he or she will pay. In more common forms of price discrimination, the seller places customers in groups based on fixed features and charges each group a different price.
Many firms use price discrimination method for getting benefits and market place.

Non price discrimination:- 1. It has the same goals as price-discrimination, described above, but depends on non-pricetools.Many firms use the non price discrimination method for improving their sales and costumers attractions. Non-price Discrimination can include quality of the product, unique selling point, superior location and after-sales service.

1.Difference between the non price discrimination and first degree price discrimination:-

The non price discrimination method uses the non price tools for discrimination , the company charges the maximum possible price for each unit purchased.

2 Difference between the non price discrimination and second degree price discrimination:-

The non price discrimination method uses the non price methods wheres second-degree discrimination involves discounts for products or services bought in quantity.

3.Difference between the non price discrimination and third degree price discrimination:-

The non price discrimination apply non price tools on cosumers while third-degree discrimination reflects different prices for different consumer groups.

4.The difference between the non price discrimination and peak load pricing:-

The non price discrimination reflect the non price tools on consumer purchase while the Peak Load Pricing is the pricing plan wherein the high price is charged for the goods and services during times when their demand is at peak.


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