Question

For each of the cases below, explain whether they represent a type of price discrimina- tion...

For each of the cases below, explain whether they represent a type of price discrimina- tion or not and, if they do, which type.

(a) As you enter a store you see a sign saying "buy 2 get 1 free".

(b) A motel charges a higher price for a room to customers with dogs or cats than to

customers with no pets.

(c) A cell phone provider offers corporate plans to businesses and individual plans to non-business customers.

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Answer #1

a) Second degree price discrimination - Under this price discrimination the seller sells large quantities at lower price to the consumer.

b) Third degree price discrimination - The motel divides its customers on the basis of pets that they have. Thus they charge a higher price from customer who come with their pets.

c) Third degree price discrimination - The seller divides its market into segments business and individuals and charges different prices to them.

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