Question

What is a "real-life" example of a price-searcher (business firm) that currently practices what the textbook defines as "price discrimination" (and is also referred to as "differential pricing") at the same location in the United States? MUST BE 3 PARAGRAPHS LONG NO SPELLING ERRORS MUST BE TYPED. identify the specific good or service that is sold by the firm that you are describing (by name). You should also include the specific location where the firm does this, identify at least two different prices that the firm charges for the same (basic) product, and mention at least two different groups of buyers who pay different prices. MUST BE 3 PARAGRAPHS LONG NO SPELLING ERRORS MUST BE TYPED. will like it and thumbs up. Thank you

Answer 1

Introduction: -

Price Discrimination strategies are regularly used by manufacturers of goods and services, so as to ensure that the segment and all of its customers are catered to appropriately. This is usually done to ensure that those that can afford to pay higher prices for the same basic service get additional ad on services which others might not receive. The basic offering or the purpose of the service or good still remains the same and includes those people also which may not have equal amount of money to pay to the business owners, but yet are a significant part of the overall demand for the good or service.

This type of pricing strategy is used to maximize profit margins and used in markets where the competition level is relatively high. Some key examples of the same include movie theatre industry, wherein for the same movie we charge different prices from people who prefer to sit on seats which may be different in quality or positioning or the airlines industry which we have chosen for answering the case study.

Case Specifics: -

For the purpose of answering the question, we have chosen Delta Airlines as the company of our choice. Here, economically speaking the company’s primary objective is to maximize its profits and make sure that all of the demand in the market place can be captured by the same.

In any airlines industry, people would want to go from point A to point B and would have different preferences as well as budgets through which they can achieve the same.

The route that we have selected for our reference, in regards to this airline is the travel from New York to Chicago via the airlines.

Now, the airlines want to tap in the maximum possible revenue from all sections of the society which may have different preferences as well as budgets to be able to pay ticket price for these services. Accordingly, the tickets are sub divided into economy. main, comfort plus and first class which are all a differentiated price strategy which is used by the business owners in order to maximize their profit margins.

In the economy class, the company charges people with as low as 98$ for the one-way ticket. Moving forward to other classes, the Main class is offered at a price band of about 128$, Comfort plus at 150$ whereas first class at around 300 dollars.

This is just an example and the actual prices vary depending on various conditions such as season, relative pricing by competition, cost of operations etc.

This describes that for the same basic service that is carrying people from point A to B the company may use different pricing mechanisms for different sections of the society in order for them to be able to maximize their profit margins.

Economically speaking this is done, because the market themselves is segregated in nature and each person has a different desire and capability to pay for the same. While some may consider comfort and privacy to be an important feature of a flight, others may give that a pass for the cost of the ticket goes up to 3 times the normal price. This then means that the company has a different offering for each class of customer so as to maximize its profit margins respectively

The two different groups here are the common people or the rich and elite sections of the society. the product or service is the airline travel experience and the pricing has been stated above.

Please feel free to ask your doubts in the comments section if any.