Chapter 14

Question 1

What is Indirect Price Discrimination

Answer 1

When a seller cannot directly identify who has a low or high value, the seller can choose to sell products that appeal to different buyer groups

Rather than Identifying groups, you have to identify specific features of the groups

Question 2

Indirect price discrimination is not only a _______ issue, but also a _______ issue.

Answer 2

• pricing
• product design

Question 3

What is the risk w/ Indirect Price Discrimination

Answer 3

That the lower priced product will cannibalize sales of the higher priced product

Question 4

Review this Comparison of Price Discriminations

Answer 4

Question 5

Review the perspective of group membership WRT price discrimination

Answer 5

Question 6

What is the Lesson of Minimum Advertised Pricing (MAP)?

Answer 6

A minimum advertised price increases total manufacturer/retailer profit over a single uniform price`

Question 7

Describe Metering

Answer 7

Metering is a type of indirect discrimination that identifies high-value consumers by how intensely they use a product (e.g., by how many cartridges they buy).

e.g., charge a big markup on the cartridges and a lower markup on the printer

Question 8

Describe pricing for an Individual customer

Answer 8

When pricing for an individual customer, do not bargain over unit price. Instead, you should

• Offer volume discounts;
• Use two-part pricing; or
• Offer a bundle containing a number of units.

Question 9

Describe the benefit of bundling

Answer 9

Bundling different goods together can allow a seller to extract more consumer surplus if willingness to pay for the bundle is more homogeneous than willingness to pay for the separate items in the bundle.

Question 10

Describe price discrimination in software

Answer 10

Software manufacturers discriminate between high- and low-value consumers by offering different versions of software designed, and priced, to appeal to different groups

Question 11

Describe the damaged goods strategy

Answer 11

When you crimp or throttle a product so you can sell it for a reduced price

e.g. Tesla 3

Question 12

Describe Volume Discounts

Answer 12

• Can be a form of price discrimination
• Can consummate unconsummated wealth

Question 13

Describe three ways to implement Volume Discounts

Answer 13

1. Offer volume discounts
2. Use two-part pricing
3. Bundle the goods

Question 14

Where do sellers typically bundle

Answer 14

where consumer value decreases w/ ea. additional unit

OR

sellers can bundle different items with different consumer demands

KEY: It makes buyers more homogeneous