Childern are charged less than adults for admission to professional baseball games but are charged the same prices as adults at the concession stands. Which of the following conditions of price discrimination explain why this occurs?
a) The seller must have some monopoly power; that is, it must be able to set the product price
b) The seller must be able to identify buyers by group characteristics such as age or income
c) Groups must have different elasticities of demand for the product
d) The items cannot be bought by people in the low-price group and trasferred to members of the high-price group
2006-07-10 10:08:17 · 3 answers · asked by Thing 5 in Business & Finance ➔ Other - Business & Finance
For children to be charged less than adults, this is an example of 3rd degree price discrimination where prices are different between markets. An example of this is students/seniors at movie theaters where these groups are not willing to pay as high of a price as adults.
The seller must be able to identify the buyers by group. If this was first degree, the seller allows the buyer to group themselves (for example, offering different bundles/price to the whole market). Generally, the buyers have different utilities that cannot be differentiated by the seller.. This means that c) isn't necessarily true.
The seller does not need to have a monopoly power. Should the seller have monopoly power, there is not reason why they would price discriminate. not a)
d) i don't think is correct either, i've never heard anything like it.
I think the answer is b). If the seller is unable to identify the groups he cannot price discriminate between them.
edit: response to the person below
- if someone has monopolistic power, they would not need to price discriminate since they are the only suppliers to the market. thus they would charge monopolistic prices where Marginal Revenue equals Marginal Cost
2006-07-10 10:22:03 · answer #1 · answered by tclphz 3 · 0⤊ 0⤋
well i think its both a and b, but i had a very crack teacher for econ this year, i'm doubting if i'm gonna pass but my opinion is both a and b cause they must have a monopolistic power, being the only one with the product to set the price and they must be able to separate their market according to their income and age etc.
2006-07-10 10:23:29 · answer #2 · answered by shaneramcharan 2 · 0⤊ 0⤋
i think b. it has been awhile since i took econ.
2006-07-10 10:11:31 · answer #3 · answered by stick man 6 · 0⤊ 0⤋