ECON Price Discrimination Strategy in Firms Discussion

ECON Price Discrimination Strategy in Firms Discussion

Instructions/Descriptions

ECON Price Discrimination Strategy in Firms Discussion

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Although monopolistic firms are price makers, in that they have the power to influence the price of their product in the market, some firms maximize profits through price discrimination. Price discrimination occurs when firms charge buyers different prices for the same goods, based on how much the buyer is willing to pay.

Consider this scenario and answer the questions that follow.

Each of the following students has the opportunity to travel back in time.

“Ronnie” wants to travel back in time to see the dinosaurs; he is willing to pay as much as $200 to use the time machine.

“Bobbi” wants to relive this semester; she is willing to pay up to $150 for time travel.

“Ricky” can’t wait for the semester to end; he is willing to pay up to $125 to use the time machine.

“Micah” just wants to get through this class period; she is willing to pay up to $100 to use the time machine.

The demand curve for time travel is:

Price

Quantity

1

$200

2

150

3

125

4

100

Based on this information, make a case for or against price discrimination. Use equations and/or graphs to justify your answer.

Lawsuit Punitive Awards Discussion

Discussion Questions:

What would be the effect of a 75 percent tax on lawsuit punitive awards that was proposed by then California governor Arnold Schwarzenegger in 2004 on:

The number of punitive awards. Demonstrate your answer using supply and demand curves. (You will post your graph as jpg. in your discussion post).

The number of pretrial settlements.

Airlines and hotels have many frequent-flyer and frequent-visitor programs in which individuals who fly the airline or stay at the hotel receive bonuses that are the equivalent to discounts.

Give two reasons why these companies have such programs rather than simply offering lower prices.

Can you give other examples of such programs?

What is a likely reason why firms whose employees receive these benefits do not require their employees to give benefits to the firm?

ECON Price Discrimination Strategy in Firms Discussion

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