Question

Tinder is an online location based dating app that allows mutually attracted users to easily interact with each other and set up future contacts using a function called a “swipe”. Tinder recently introduced “Tinder Plus” which allows subscribers extra functionality within their accounts. One of the sought after functions is the ability of paid subscribers to “rewind” a limited number of swipes. This new pricing strategy has generated a significant amount of controversy because of its two-tiered approach. Users under 30 will pay $9.99 a month, while users over 30 will pay double that amount, or $19.99. 1. What economic principle(s) is Tinder’s marketing department counting on to make this decision pay off? 2. How is this economic principle connected to total revenue?

Answer 1

1) The price variation for different age group people are seen here where it is on the basis of price discrimination. To be more specific, the economic principle that is used here is Third degree price discrimination where customers are charged different prices based on age, sex, gender etc.

2) With third degree price discrimination, the customers are allowed to pay more at cases and this can get to gather part of consumer surplus of the customers with which the total revenue increases for Tinder.