Question

Taylor Swift is playing a concert at Suncorp Stadium in Brisbane. Tickets are $150 each, or $500 each for the VIP Package which includes the opportunity to meet Taylor Swift.

Select the item from the list provided to make the following statements true.

-       1.       2.       3.       4.       5.       6.       7.       8.       9.       10.       11.       12.    Taylor Swift’s pricing strategy indicates use of __________.       -       1.       2.       3.       4.       5.       6.       7.       8.       9.       10.       11.       12.    Johnny purchases some Taylor Swift tickets with the intention of selling these for a higher price. He is engaging in __________.       -       1.       2.       3.       4.       5.       6.       7.       8.       9.       10.       11.       12.    If the concert does sell out it, and people like Johnny are unable to sell their tickets for a higher price, the market can be considered to have been__________.

1. First degree price discrimination 2. Second degree price discrimination 3. Third degree price discrimination 4. Peak load pricing 5. Pricing power 6. Arbitrage 7. Inefficient 8. Collusion 9. Dominant 10. Dominated 11. Prisoner's dilemma 12. Efficient

Answer 1

Part (a)

When seller sells tickets at different prices to different customers based on their elasticity of demand then it is said that seller is engaging in the third degree price discrimination.

Taylor Swift is charging different prices for concert tickets which indicates different preference of her fans for the concert.

So,

Taylor Swift's pricing strategy indicates use of Third degree price discrimination (3)

Part (b)

When a good is purchased at low price to sell and it at high price and profit from the difference then, in that case, person involved is said to be indulging in arbitrage.

So,

Johnny is engaging in Arbitrage (6).

Part (c)

If the concert does sell out it, and people like Johnny are unable to sell their tickets for a higher price, the market can be considered to have been efficient (12).