Question

2. How do carriers price discriminate? Mention at least three methods of price discrimination (use Steen and Sorgard).

Answer 1

• Airlines Price Discriminate in two ways;

1. First By offering consumers a range of packages or combination of fares and restrictions attached to the ticket
2. Second By restricting the the number of discounted seats on each flight.

• Three Methods For Price Discrimination.

1. First-Degree Price Discrimination

This Type of Pricing strategy takes place when business ca accurately determine what each customer is willing for a specific product or service and selling that good or service for that exact price

2.Second-Degree Price Discrimination

In second Degree Price Discrimination the, ability to gather information on every potential buyer is not present. Instead companies price products or services differently based on the preferences of various group of consumers.

3.Third-Degree Price Discrimination.

Third-Degree Price discrimination occurs when companies price products and services differently based on the unique demographics of subsets of its consumer base, such as students, military persons or seniors.