Question

Sling is a streaming television service that lets you watch live network TV (and local channels), including the ability to add “a la carte” channels so you don’t pay for channels you would never watch. It has three plans or options (though two are the same price even though Sling Orange has fewer channels and can only stream on one device at a time, and Sling Blue has more channels and can stream on three devices at one time) from $15 to $25 per month (though those may be introductory rates). From Sling’s perspective, the difference in the cost of service provision between each plan or option seems to be basically the same (it streams content to your device and automated software handles the different features between plans). How do you explain the different prices for virtually the same service, given that the cost to Sling of providing each plan is basically the same?

Answer 1

This is a case of price discrimination , second degree . Mostly by charging different prices for different quantities , by giving discounts on bulk purchases. Or by varying price with time of purchases like peak period prices . It will also have consequences like some consumers will pay higher prices while others will pay lower . At off peak times , market demand is low and farm will have spare capacity . At peak times marginal cost may also be higher as capacity limit is reached.

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