U1 AOS 2 - Lesson 18 - Strategies to Maximise Profit Flashcards
Price Discrimination
Involves a business charging consumers different prices for the same product
→ consumers who otherwise could not afford to pay can now buy the good/service
→ businesses can impose higher prices on high value customers → increase revenue
Examples of Price Discrimination
- Concession bus fares
- Student discounts for software
- Kids eat free
Multiple Branding
Individual companies market their products under separate and distinct brand names → allows businesses to increase the number of products sold and makes it hard for new entrants in the market
Anti-Competitive Behaviour
- Strategies to limit competition or collude with rival firms to exploit consumers by charging higher prices
- Controlled by the Australian Competition and Consumer Act 2010
Includes:
* Predatory Pricing
* Cartel Conduct
* Price Fixing
* Collusive Bidding
* Market Zoning
Predatory Pricing
A company sets its prices at a very low level which its competitors cannot compete with → forces competitors to leave the market → company can dominate market and raise prices
Cartel Conduct
Companies agree to not compete against each other → develop joint strategies to maximise profits
Price Fixing
Firms in an industry collaborate to set prices
Collusive Bidding
Competing firms secretly agree whose tender should be most competitive and attractive, but other higher bids are placed to give the illusion of competition
Winner of the tender may pay a percentage to the other cooperating firms or may rotate between firms
Market Zoning
Competing firms divide the market into geographical zones or regions, where they agree to not compete with each other
The Australian Venues Co owned 8 different venues in Richmond, including the Swan Hotel, the Richmond Club Hotel and the Prince Alfred Hotel.
This is an example of
A. Market zoning
B. Predatory pricing
C. Multiple branding
D. Price discrimination
C
A telco provides a $50 off their mobile plans for new customers. Is this an example of price discrimination?
Yes - lower price for the exact same service.
Aims to attract customers who are lower income - as these are the groups who tend to compare plans more often
Two months ago, a flight to King Island cost $180 return. Now this flight leaves in one week and costs $240 return. Is this an example of price discrimination?
Yes - higher price for the exact same service.
Targets last minute or business travellers who cannot book in advance, and who have greater spending capacity
The new Costco in Deer Park sells individual tins of tomatoes for $1.20. However, if a consumer buys an entire box (12 cans), the total price is $8 (67¢/can). Is this an example of price discrimination?
Yes - lower price for the exact same individual goods
The bulk price is to encourage consumers who have greater spending capacity and can afford the higher upfront price.
Walter White Plumbing has an agreement with El Camino Plumbing and Better Call Saul’s Plumbing.
They agree that Walter White will provide plumbing services to new houses in Lucas and Alfredton; El Camino services Sebastopol and Bonshaw; and Better Call Saul services Winter Valley and Delacombe.
This is an example of
A. Market zoning
B. Predatory pricing
C. Cartel conduct
D. Price discrimination
A - which is more specific than just cartel conduct
The State Government intends to expand the Ballarat Base Hospital with a new children’s and maternity ward.
Walter White Plumbing, El Camino Plumbing and Better Call Saul’s Plumbing agree to all place tenders to construct the various pipes required for the new hospital, and they agree that the bids are placed as follows:
- Walter White = $15,000
- El Camino = $12,000
- Better Call Saul = $18,000
The three plumbers have agreed that El Camino should pay Walter White and Saul $2,000 each, since they have allowed him to win the tender.
This is an example of
A. Collusive bidding
B. Predatory pricing
C. Cartel conduct
D. Price discrimination
E. Price fixing
A - collusive bidding relates specifically to tenders and contracts
Previously, Rex was the only operator of flights between Melbourne and Albury. However, QantasLINK entered the market and offered fares that were 50% cheaper than what Rex could provide. As a result, Rex could no longer compete and left the route.
This is an example of
A. Collusive bidding
B. Predatory pricing
C. Cartel conduct
D. Price discrimination
E. Price fixing
B
Coles and Woolworths have been recently (Mar 2025) been found to ‘price cycle’ with each other, whereby one store will sell a good at half price while the other sells it at full price. The next week, the stores alternate, so that the store that was selling at full price is now selling at half price and vice versa. This has occurred for goods including chocolate, laundry liquid, soft drink and mayonnaise.
This is an example of
A. Collusive bidding
B. Predatory pricing
C. Cartel conduct
D. Price discrimination
E. Price fixing
C
Not price fixing because they are not selling at the same price at the same time
