Question

Price discrimination exists when a business is able to charge different prices to different customers based on their willingness to pay. Answer the following questions regarding price discrimination with Apple.

1. What good or service do they sell?

2. Which degree of price discrimination do they engage in? (1st, 2nd or 3rd)

3. How are they able to determine which customers are willing to pay more for the good or service? Explain in detail.

4. How are they able to prevent re-sale of the good or service? Explain.

5. How is price discrimination beneficial to this business? Explain.

Answer 1

1. Multiple Goods and Services ranging from iPhones, Tabs, Laptops, App Store services etc.
2. In my opinion, Apple's price discrimination is of third type, as they charge different price to different consumer groups: (iPhone 6s, iPhone 6 etc)

3. They determine the willingness to pay by launching various versions of similar products: IPhoe 6, 6s, Macbook Pro, Air etc. This way they can estimate the demand curve for each range of their products.

4. They prevent res-ale by making the product different from the rest of the industry, making their product differentiable and something which cannot be duplicated and also, they keep innovating, i.e. keep launching newer versions at regular intervals.

5. Gives them power to price independently, allows them to sufficiently focus on R&D and keep innovating, allows them to offer higher returns to shareholders, better salaries to employees and services to consumers etc. Gives them a monopoly like power in an extremely competitive industry.