Chapter 15
Ariel owns an automobile dealership that sells several car models. Ariel negotiates the price with each customer so that they are willing to pay the highest price possible. This results in customers paying different prices for the same model. Ariel is
practicing perfect price discrimination
The goal of price discrimination is to increase
profit by charging each customer the highest price he is willing to pay.
When a seller uses group pricing, members of the same group pay
the same price for the product
To prevent people from pretending to qualify for the market segment with the lowest price, a company manager that engages in group pricing needs to make sure that
there is a simple way to verify the segment in which a consumer qualifies.
Hassan is a student who received a coupon to buy pizza from Pizza House at $4 off the regular price. Students at Hassan's school seem to receive the coupons frequently. Which of the following is an assumption that the owners of Pizza House are making about students at Hassan's school?
they are price sensitive
As a company manager, what do you need to know about your customers before you can successfully price discriminate?
you need to know each customers reservation price
If a company engages in perfect price discrimination, it is attempting to
charge each customer to their reservation price
When price discrimination is practiced, a company sells _____ and charges _____ compared to what it would do without practicing price discrimination.
larger output; greater range of prices
With price discrimination, a company ends up selling
more but at an efficient output level
When a company price discriminates, it ends up selling
more than it would sell otherwise
Which of the following statements is FALSE about group pricing?
The higher the reservation price of a group, the more sensitive the group is to price changes.
Which of the following statements is FALSE about group pricing?
The lower the reservation price of a group, the more inelastic the group's demand for the product.
Individual pricing is a way to describe
perfect price discrimination