Question

Question 4- McDonald is famous for the Extra Value Meal, a form of mixed bundling with a leader combined with large French Fries and medium soft drink. The following table gives you the Bundled Price and the Separate Price. SEPARATE PRICE Non Bundled Price BUNDLED PRICE Large French Fries 1.39 Medium Soft Drink 1.09 McGrill Chicken Sandwich 2.69 2.69 +1.09+1.39=5.17 4.29 McChicken Sandwich 1.00 3.48 3.39 Double Cheeseburger 1.00 3.48 3.39 Quarter Pounder 2.19 4.67 3.79 Is this direct or indirect price discrimination? Explain

Answer 1

This is an indirect form of price discrimination because it gives the consumers a range of purchase options allowing individuals to sort themselves into purchases that reflect the reservation prices that consumers are willing to pay. Quantity discounts are indirect form of price discrimination. Direct price discrimination, on the other hand, involves segmenting consumers into groups and charging different prices from different group of consumers.

Thus, the above case is an indirect form of price discrimination.