Question

Explain the various forms of price discrimination: Bundling, Gate Pricing, Two part pricing, Block pricing, The hurdle model of price discrimination, Tying markets, etc.

Answer 1

1. In a bundling pricing, companies sell a package or set of goods or services for a lower price than they would charge if the customer bought all of them separately. Pursuing a bundle pricing strategy allows you to increase your profit by giving customers a discount.

2. Gate Pricing is a basic price with the “factory gate” as the pricing point, i.e., the price of the product available at the factory, excluding any separately billed transport or delivery charge

3. A two-part tariff is a price discrimination technique that consists in charging consumers with a lump sum fee for the right to purchase the product and then a price per unit consumed. A two-part tariff (TPT) is a form of price discrimination wherein the price of a product or service is composed of two parts a lump-sum fee as well as a per-unit charge. In general, such a pricing technique only occurs in partially or fully monopolistic markets.

4. Block Pricing is the pricing different on different quantities. You can price a product based on several different quantity ranges, called block prices. Block pricing is useful when you sell products by packs or groups of various quantities and want to represent the pack as a single quote line.

5. The hurdle method separates buyers with low minimum buying prices from buyers with higher so-called reservation prices. To take advantage of a lower price, the consumer must be prepared to overcome or jump over some kind of hurdle which acts as an inconvenience.

6. A tying arrangement is defined as an agreement by a party to sell one product but only on the condition that the buyer also purchases a different (or tied) product, or at least agrees he will not purchase the product from any other supplier.