Question 1

Consider three pricing strategies that the firm can pursue: a. optimal two-part tariff pricing;
B. perfect price discrimination
C. single-price monopoly pricing
Of these three strategies, which is most beneficial to society as a whole?

Accepted Answer

A)  Both perfect price discrimination and a two-part tariff pricing are equally beneficial in that the marginal benefit of the last unit sold equals the marginal cost of producing that unit. 
B)  only perfect price discrimination because this pricing method eliminates deadweight loss 
C)  single-price monopoly pricing because consumers enjoy at least some consumer surplus 
D)  only two-part tariff pricing because the per-unit portion of the price is set equal to marginal cost

Question 2

Are restaurant coupons a form of price discrimination? Why or why not?

Accepted Answer

The answer of Are restaurant coupons a form of price...

Question 3

Many firms use odd pricing-charging prices such as $.99 instead of $1.00 and $9.99 instead of $10.00. One reason for this pricing strategy is that consumers will somehow believe that the difference in price appears to be greater than it actually is. Researchers conducted consumer surveys to determine whether this is actually the case. What was the result of these surveys?

Accepted Answer

A)  The surveys found that small differences in price cause small differences in quantity demanded. There is no evidence that odd pricing makes economic sense. 
B)  Although the results were not conclusive, there is some evidence that odd pricing makes economic sense. 
C)  The surveys found indifference regarding this strategy among most consumers, but hostility among other consumers. The latter group resented what they viewed as an attempt to fool them into buying products with odd prices. Researchers concluded that odd pricing is counterproductive. 
D)  The survey results were inconclusive because most consumers gave unreliable responses to the survey questions.

Exam 16: Pricing Strategy

Consider three pricing strategies that the firm can pursue: a. optimal two-part tariff pricing; B. perfect price discrimination C. single-price monopoly pricing Of these three strategies, which is most beneficial to society as a whole?

Are restaurant coupons a form of price discrimination? Why or why not?