Question

Consider three firms: a shoe store at the mall, an automobile dealership, a house painting firm. Which firm would you expect to engage in the most price discrimination? Why?

Answer 1

• Price discrimination is a pricing strategy in which a seller charges different price's to different customers by analysing their willingness to pay.
• A price discriminating firms charges maximum from a customer who can afford the good at a higher rate and charges less from a customer who cannot afford to buy the good at a high rate.
• Among the three firms, a house paining firm would most likely engage in price discrimination.
• This is because a customer may not consider to obtain additional coats of paint as it may be expensive for them. Hence these paints cannot be resold.
• But shoes and cars can be easily resold, so these firms do not require any price discrimination inorder to sell their goods, they rather fix their price's to sell them.
• The House painting firm, price discriminates and analyses each customer's willingness to pay before they set the prices of their paints for each customer.