Question

Dressing Mexican women for more than 60 years has given Vicky Form a valuable experience that she will now use to launch new products. The directive ensures that the company, 100 percent Mexican, has taken advantage of technological advances that allow creating garments with more elaborate designs and with additional benefits, such as integrated girdles, antistatic fabrics and invisible seams. Thanks to these advantages, the company has resisted the onslaught of low-cost garments from Asia, as its buyers distinguish quality and durability. "Low-income people buy from our catalog or in supermarkets, while higher-income women look for us in our boutiques, where the offer becomes even more elaborate," she says. In accordance with the above, answer true or false to the following statements:

a. Vicky Form's strategy of offering its products at the same price through different means of distribution and / or commercialization in order to reach different market segments is price discrimination (T / F)
b. In perfect competition, price discrimination helps the producer increase his economic well-being (V / F)

Answer 1

a) The statement is False.

This is because, the very term price discrimination is the practice of charging different prices to different consumers for similar goods. But, here, Vicky Form is charging the same price to her consumers.

b) The statement is False.

Price discrimantion is a way of increasing monopoly profit when the producer has market power, as in, monopoly markets. In a perfectly competative market, producers make normal profit, not monopoly profit. So price discrimantion does not engage with perfect competition and hence cannot increase producer's well being in perfectly competative markets.