Ch. 16 - Price Discrimination & Pricing Strategies

Question 1

What is price discrimination?

Answer 1

Selling the same good at different prices

Question 2

What is a reservation price?

Answer 2

The maximum price a customer will pay for a product. It is equal to their marginal benefit

Question 3

What is perfect price discrimination?

Answer 3

Charging each customer their reservation price

Question 4

What is group pricing?

Answer 4

Price discrimination by charging different prices to different groups of people

Question 5

What are the 3 conditions for price discrimination?

Answer 5

1. Your business has market power
2. You can prevent resale
3. You can target the right prices to the right customers

Question 6

What is the hurdle method?

Answer 6

Offer lower prices only to those buyers who are willing to overcome some hurdle or obstacle

Question 7

What is a quantity discount?

Answer 7

When the per-unit price is lower when you buy a larger quantity

Question 8

What is bundling?

Answer 8

Selling different goods together as a package