Question

At a local Walgreens store, a 100-count package of Benadryl sells for $15.99 and a 48-count package of Benadryl sells for $10.49. Explain why the manufacturers of Benadryl might use this type of pricing. Is this an example of direct or indirect price discrimination?

Answer 1

Some consumers are bulk users so they are willing to buy a higher quantity if price is somehow lowered. Others might not be as interested and so they would buy small blocks. In this case manufacturers of Benadryl are using price discrimination of second degree / block pricing because they are not sure of the consumer type but they are certain that both these user types exist in the market

This strategy raises profits more than the profit earned for a single price or a single block because it allows consumers to sort themselves out. Since, pricing is not direct and manufacturer is allowing consumers to choose a certain block according to their requirement, this is indirect price discrimination.