CH 14 Indirect price discrimination requires identifying some potential product feature that is correlated with value Business travellers value first-class tickets at $2,000 and coach tickets at $1,00 ...

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CH 14
Indirect price discrimination requires
identifying some potential product feature that is correlated with value
Business travellers value first-class tickets at $2,000 and coach tickets at $1,000. If coach tickets are currently
priced at $400, what should be the price of the first-class ticket? $1,399
A razor blade manufacturer gives away razors for free but charges a very high price for the razor blades. What
must be true for this metering strategy to be profitable?
Higher value consumers use more blades than lower value consumers .
Which of the following can take advantage of the fact that a coffee shop's customers value each successive cup
of coffee less than the previous cups.
a. Offer unlimited coffee for a single price with free refills.
b. Sell a "souvenir cup" with the price of refills equal to the shop's marginal cost.
c. Have a "frequent customer" program with a 10% discount on your second purchase each day,
d. 20% discount on your second purchase, and so on.
e. All of the above
Bundling two products is likely to increase profit when
customers who highly value one product have a relatively low value for the other product.
A car manufacturer is considering selling a "standard" and a "deluxe" version of an automobile. The
manufacturer has identified two equally sized consumer segments. Their values are given in the table below.
The marginal cost of both versions is $10,000. Which is the most profitable strategy.
Version/Consumer A/Consumer B
Standard/$25,000/$35,000
Deluxe/$28,000/$50,000
Price the standard version at $25,000 and the deluxe version at $40,000
A car manufacturer is considering selling a "standard" and a "deluxe" version of an automobile. The
manufacturer has identified two equally sized consumer segments. Their values are given in the table below.
The marginal cost of both versions is $10,000. Which, priced appropriately, is the most profitable strategy.
Version/Consumer A/Consumer B
Standard/$25,000/$45,000
Deluxe/$30,000/$50,000
Sell only a deluxe version.
Which of the following is true about selling a standard and a deluxe version of a product targeted to different
segments of customers?
The price of the deluxe version may need to be reduced when introducing a standard version.
Which of the following is an example of indirect price discrimination?
An early bird special at a restaurant before 6 pm.
Half of a fast food restaurant's consumers value the Signature Sandwich at $3 and the Tater Fries at $2. The
other half value the Signature Sandwich at $1 and the Tater Fries at $3. Marginal costs are zero. What are the
restaurant's total profits (per customer) without bundling (selling each item separately at its own price) and with
bundling (selling both items together for a single price).
$3.50 with bundling; $4.00 without

38. When deciding what price to charge customers, a firm may choose to charge different prices based on customers’

a. Age

b. Willingness to pay

c. Location

d. All of