Question

In which cases would an organization benefit from using direct and indirect price discrimination? Does market structure influence the capacity of the firm to use price discrimination?

Answer 1

1):-Price discrimination is the practice of charging different prices to different buyers orgroups of buyers based on their differences in demand (Froeb, McCann, Short, & Ward, 2016)

. An organization can benefit from using both direct and indirect price discrimination. Both are meant to drive up profit margins, but depending on the situation and the product/service being sold, an organization would need to choose one of the two.

Direct price discrimination is a strategy that companies use to charge different prices that are relative to the consumer’s type for the same good or service. This is meant to increase profit margins (Froeb, McCann, Short, & Ward, 2016). A good example is Matinee for movie theaters. During the weekday (in summer) and certaintimes on the weekend, theaters will charge a lower price for adults (typically the price of a child’s ticket) to encourage families to see movies during the daytime, so most are busier at night. They know if the ticket is cheap for the adult, they are morewilling to bring their children in to see the movie or even just come in as a couple