What three conditions must be present for a company owner to price discriminate successfully?
Question
What three conditions must be present for a company owner to price discriminate successfully?
Solution
To successfully price discriminate, a company owner must meet three conditions:
-
Market Power: The company must have some control over the market price. This is usually achieved through product differentiation or being a monopoly.
-
Identifiable Market Segments: The company must be able to identify different market segments that have different price sensitivities. This could be based on factors like age, location, or income level.
-
Prevention of Arbitrage: The company must be able to prevent customers from reselling the product or service. If customers could buy the product at a lower price and then sell it to the higher price segment, the price discrimination would not be successful.
Similar Questions
What is a common approach in third-degree price discrimination? A. Loyalty programs B. Auctions C. Everyday low pricing D. Seasonal promotions
True or False QuestionTrue or false: Price discrimination is not practiced very often in the US economy.True false question.TrueFalse
One approach to focusing is to service either industrial buyers or consumers, but not both.Question 3Select one:TrueFalse
Price discrimination is a common pricing strategy used by a monopolist having discretionary pricing power. Explain Types of Price discrimination.
what factors that buyer look at when determining the right price for the supplier
Upgrade your grade with Knowee
Get personalized homework help. Review tough concepts in more detail, or go deeper into your topic by exploring other relevant questions.