Question

Textbook publishers have traditionally produced both United States and international editions of most leading textbooks. The United States version typically sells at a higher price than the international edition.

(a) What is this price strategy called ? Discuss why publishers use this pricing plan. (b) Discuss how the Internet might affect the ability of companies to implement this type of policy.

Answer 1

a)

This is called price discrimination strategy.

b)

Since elasticity of demands are not same across the market. Foreign market is relatively more elastic, thus higher price can not be charged from international market. Low price is charged from international market.

c)

Such price discrimination strategy can be successful only if both market exist separately. There should not be cross movement. Internet has made books available in PDF form and these books can be accessed from any part of world. Thus, now it has become difficult to implement such price discrimination strategy successfully.