Asked by nshimiye jeanpaul on Sep 24, 2024
Verified
For direct price discrimination to work
A) The firm need not be able to identify the members of the low-value group
B) The firm be able to charge the low-value customers a lower price than the higher-value customers
C) The firm need not worry about any arbitrage since all its customers are charged the same price
D) It needs to be too complicated for the customers to understand
Direct Price Discrimination
A pricing strategy where a business charges different prices to different customers for the same product or service, based on willingness to pay.
Arbitrage
A means to defeat a price discrimination scheme; it occurs when low-value individuals are able to resell their lower-priced goods to the higher-value group.
Low-value Group
A segment of the market or population perceived to have less purchasing power or economic importance.
- Identify the conditions necessary for price discrimination to be effective.
Verified Answer
AE
Azarria Erdal-Saleem2 days ago
Final Answer :
B
Explanation :
For direct price discrimination to work, the firm needs to be able to charge the low-value customers a lower price than the higher-value customers. This is the basic requirement of price discrimination, and without it, the firm won't be able to differentiate between customers and charge them differently. The other choices are incorrect because identifying the low-value group and worrying about arbitrage are important concerns of price discrimination, and making the pricing too complicated may hurt the firm's reputation or customer loyalty.
Learning Objectives
- Identify the conditions necessary for price discrimination to be effective.