Question

Find a product that is sold at different prices for different bundles or different groups of consumers (strategic pricing).

(a) Interview a store manager or firm marketing director to ask for the rationale for the pricing strategy and the different consumer groups;

(b) summarize your findings;

(c) analyze the strategy and offer recommendations.

For the sake of privacy, you may change the name of the company.

250-300 WORDS TOTAL (ORIGINAL CONTENT)

Answer 1

Second degree price discrimination is common in case of hotel industry. In such industry spare rooms are sold on the last minute on stand by basis. Fixed cost of production is high in such industry and variable cost of production is low in such industry. If there are unsold rooms then they are sold at discounted prices to the consumers. The marginal revenue generated will help in covering the marginal cost of production. Raised profits is the main rationale for this pricing strategy as seller will earn something rather than earning nothing.

The strategy is good as it helps to sell the hotels to sell their room even in case of off season and if their marginal cost is getting covered then the product should be sold in the market at different prices.