Question

14-1 Price Discrimination Does your company price discriminate? Explain how the practice works (direct or indirect) and estimate the profit consequences of price discrimination relative to charging a single, uniform price. If your company doesn’t currently price discriminate, are there opportunities to do so? How would you design the price discrimination? Estimate the profit consequences. Uses numbers.

Answer 1

Answer:

14-1:

Price Discrimination:

It occurs because the existence of the consumers of different states suppliers look for profit.

Hence discriminate prices according to the groups of people, their states, income, preference, geography etc.

While in certain cases the identification of different groups and their requirement is possible, in such situations the supplier uses direct price discrimination.

But it is not possible in the case of the indirect price discrimination.

Here, the suppliers has to identify the certain features of the consumer like the willingness to spend of certain groups of the people etc.

Indirect price discrimination occurs in various forms like offers, reductions, sales etc.

This is a travel agency which has often to use indirect price discrimination when it comes to booking tours for customers.

This is possible only by studying the nature of booking and customers.

There are the ones who plan their holidays in advance and there are others who have a limited time for booking like the professionals who have to plan their business tours in a short period of time.

It quite becomes difficult to anticipate the purpose of the approaching customers and hence the company takes the help of a set of questionnaire to understand the purpose and then it helps to fix the price for the customers.

The customers coming with short notice are charged high than the others.

The company also offers seasonal offers that attract customers to plan holidays and thus company can take advantage of the rush and vacation seasons.