which of the following is a necessary condition for price discrimination to be profitable? This is a topic that many people are looking for. star-trek-voyager.net is a channel providing useful information about learning, life, digital marketing and online courses …. it will help you have an overview and solid multi-faceted knowledge . Today, star-trek-voyager.net would like to introduce to you Conditions for Price Discrimination. Following along are instructions in the video below:
“There here s a short topic video looking at the conditions required for businesses to to engage in price discrimination. Price discrimination is when a business charge is a different two different groups of consumers for the same good or service and also for reasons not associated with the costs of supply. We see price discrimination often in markets. That s it s very very frequent.
Very common. But what are the conditions required for thermosphere to do this well the first is that we don t see part discrimination in a perfectly competitive market because in that market. Structure. Firms are if you like passive price.
Takers. Instead of price makers. So monopolist have pricing power and indeed. Any firm.
An imperfect competition can engage in some shape or form in price discrimination..
So the key is to have a downward sloping demand curve to have some pricing power second condition is the ability to identify groups with a different price elasticity of demand. This is of course essential particularly for third degree discrimination. So a firm will aim to charge a higher price to the group. With price.
Inelastic demand and the lower price to a group with a more elastic demand. In other words. The group that s more price sensitive. They can do that of course they can lift total revenue and they can become more profitable as a result.
They can turn consumer surplus into producer surplus price discrimination also requires firms to have quite a lot of information. If you like quite a lot of market intelligence about consumer behavior about buying habits about the sensitivity of consumers to different market conditions. I ll give you an example of that in a second because the internet of course is giving companies a huge amount of data on consumer preferences and actual buying behavior. Another really important condition is the idea of the ability to prevent what s called arbitrage.
Prevent and resale in other words consumers business..
After event. Consumers switching from one supplier to another consumers might have purchased a product a lower price. And maybe resell. It to consumers who would otherwise more expensive parts.
Now. There s a number of ways in which you can prevent hui sale in other words preventing resale in the secondary market you might sell a product to a consumer to a unique moment in time example. An airline ticket is a specific flight a specific time from a specific gate. Can t be resold and the only circumstances we re selling cheap discount rail tickets.
Which can only be used on a very specific service checked by the conductor it might be a case. Where you can limit sales to particular age groups. And you can use id cards for beforebefore purchases made software businesses might offer educational users a discount. But they have to acquire academic.
Email address or there could be there is a specific access a verification code so proof of identification that kind of stuff is a way of preventing result..
So what are the conditions. The conditions are easiest when a firm is able to find separate distinct markets. Where firms product different price elasticity of demand. And where the firm is able to prevent the resale and their words consumers.
Paying a low price could then find other consumers and find a deal to be made cinemas of course engage in price discrimination. All the time has a price list from the view senemo and leads peak off peak prices. Obviously they re different prices for families. Some films were expensive than others that depends in part on the price that the ship is one to charge and of course.
There s a ticketing system whereby you can prevent the resale. So often used regularly by cinemas and here s an example of what i was saying before about the way in which the internet is is creating so much information for businesses that they re able to to go to the next level. So that s called hyper targeting. It s we re basically businesses could almost personalize.
The price or the range of vices on offer for consumers..
In you know in front of their screen. At home being q is currently testing electronic price tags. Which always recognize who the consumer is in store. Some of the bucket shop businesses like late bloomers comm and booking comm they can use the cookies that you leave on your website to hyper target particular consumers they can offers very specialized deals so increasingly with e commerce.
As people build up a digital profile businesses are able to and the cost of course that information is pretty low for businesses. If you leave information on your web sites on your internet browser history for example then businesses in theory can engage in what s called hyper priced targeting. They can almost offer you personalized discounts based on the browser. You re using based on your previous search history and based on other information that you leave on the internet.
Now this this makes it easier for firms to price discriminate. The bigger question that i suppose is whether this is a legal post case. It is but also whether it s ethical for businesses to use this so we ve been through here some of the key conditions required for price discrimination to ” ..
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