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Explain Whether This Pricing Policy Could Be Considered to Be an Example of Price Discrimination.

  • Date Submitted: 08/11/2014 07:40 PM
  • Flesch-Kincaid Score: 38.7 
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Clarify terminology by defining price discrimination (PD) and state the conditions for PD
o Economic framework: Firm‟s level of analysis; PD
o What is price discrimination?  
 Define what is price discrimination
o State the 3 degrees of price discrimination.  
o Explain the necessary conditions for 3
rd
degree price discrimination to be practiced
 Degree of monopoly power
 No resale of goods
 Segmented markets with differing price elasticities of demand  

 Thesis (must place response within the popular concert and seating arrangement context)
o Explain that this pricing policy may be considered to be an example of price
discrimination because it fulfils some or all of the conditions of price discrimination
 Identify that the pricing policy is an example of third degree price
discrimination  
 Define third degree price discrimination and explain why this pricing
policy is an example of third degree price discrimination
o Charging the same product (in this case, to watch the
concert) at different prices to different consumers for reasons
not associated with cost differences
o Same product – watch the concert
o Loyal fans will be willing to pay a higher price for the tickets
and will have a more price inelastic demand than non-fans.
Fans who prefer to have a close up view of the pop idol(s)
will have a more price inelastic demand than non-fans.
Hence firm can charge fans who demand for a seat closer to
the stage or a more centralised seat a higher price than non-
fans who are not particular about their seats. Hence firm can
charge a higher price for seats that are closer or more
centralised to the stage than those further away from the
stage or at the rear  
 Explain why the conditions of PD are fulfilled in the given context  
o Differences in price not due to cost differences
 Yes. Cost of producing the seats, of renting the
venue, of hiring the band, of logistics and
administrative costs...

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