4. A monopoly seller who charge different price to different buyer?
Answers
Answer:
The monopolist often charges different prices from different consumers for the same product. This practice of charging different prices for identical product is called price discrimination.
Answer:
ion occurs when identical goods and services are sold at different prices by the same provider. In pure price discrimination, the seller will charge the buyer the absolute maximum price that he is willing to pay. Companies use price discrimination in order to make the most revenue possible from every customer. This allows the producer to capture more of the total surplus by selling to consumers at prices closer to their maximum willingness to pay.
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Price discrimination: A producer that can charge price Pa to its customers with inelastic demand and Pb to those with elastic demand can extract more total profit than if it had charged just one price.
An example of price discrimination would be the cost of movie tickets. Prices at one theater are different for children, adults, and seniors. The prices of each ticket can also vary based on the day and chosen show time. Ticket prices also vary depending on the portion of the country as well.
Industries use price discrimination as a way to increase revenue. It is possible for some industries to offer retailers different prices based solely on the volume of products purchased. Price discrimination can also be based on age, location, desire for the product, and customer wage.
Forms of Price Discrimination
There are a variety of ways in which industries legally use price discrimination. It is not important that pricing information be restricted, or that the price discriminated groups be unaware that others are being charged different prices:
Coupons: coupons are used in retail as a way to distinguish customers by their reserve price. The assumption is that individuals who collect coupons are more sensitive to a higher price than those who don’t. By offering coupons, a producer can charge a higher price to price-insensitive customers and provide a discount to price-sensitive individuals.
Premium pricing: premium products are priced at a level that is well beyond their marginal cost. For example, a regular cup of coffee might be priced at $1, while a premium coffee is $2.50.
Discounts based on occupation: many businesses offer reduced prices to active military members. This can increase sales to the target group and provide positive publicity for the business which leads to increased sales. Less publicized discounts are also offered to off duty service workers such as police.
Retail incentives: retail incentives are used to increase market share or revenues. They include rebates, bulk and quantity pricing, seasonal discounts
Gender based discounts: gender based discounts are offered in some countries including the United States. Examples include free drinks at bars for women on “Ladies Night,” men often receive lower prices at the dry cleaners and hair salons than women because women clothes and hair generally take more time to work with. In contrast, men usually have higher car insurance rates than women based on the likelihood of being in an accident based on their age.
Financial aid: financial aid is offered to college students based on either the student and/or the parents economic situation.
Haggling: haggling is a form of price negotiation that requires knowledge and confidence