Question

6. Examples of price discrimination Complete the following table by indicating whether or not each scenario is an example of price discrimination. Hint: To determine whether a scenario is an example of price discrimination, think about whether the market can be segmented into two groups that pay different prices for the same good. Price Discrimination Yes No Scenario A local boutique is having a sale on sweaters, but customers are not aware of the sale until they are already in the store. In other words, there is no advertising of the sale other than signs in the back of the store that cannot be seen from the outside. All sweaters are marked as 55% off. Last-minute "rush" tickets can be purchased for most Broadway theater shows at a discounted price. They are typically distributed via lottery or on a first come, first served basis a few hours before the show. Assume that the theater in question does not hold seats in reserve for this purpose, but rather offers rush tickets only for seats not sold before the day of the performance

Answer 1

A) Since, You do not need to advertise sale and also mostly sales are non-advertised. So, As long as boutique shopkeeper is charging same price to each and every customer for their good, it's not called as price discrimination. Because, price discrimination means charging different prices to different individuals for same good/product. Also, sale is given to reduce the stock of that particular good. Now, assume winter comes for 3 months. A buyer buys sweater @1000 on the first day of its arrival, and another buyer pays only 450 (55% discount) and buys sweater just 1 month before the winter season ends. SO, there is not any price discrimination.

B) Yes, This is the case of price discrimination because some people have paid more than others for a same show, and in this case, there were no reserved seats, so the product was same for all consumers but not the price.