Multiple Choice
In 2011,Netflix was charging $23.98 per month to rent three DVDs at a time as well as receive unlimited streaming.Although all subscribers under this plan pay the same rate,they do not receive the same quality of service.Subscribers who rent the fewest movies per month have the best chance of receiving the latest releases (for which there is usually a wait list) and will typically receive their DVDs faster.Is Netflix engaging in price discrimination,and if so,why?
A) No, it is not; it is merely differentiating its product by offering different levels of service.
B) No, it is not; as long as there is a wait list, Netflix must devise a rationing mechanism. Its decision to give priority to those who rent only a few DVDs is a business strategy independent of pricing.
C) Yes it is; Netflix is charging the same price for two different levels of service. It does this to increase its profit.
D) Yes it is; Netflix wants to discourage those who rent many DVDs per month because they lower the firm's profits.
Correct Answer:
Verified
Correct Answer:
Verified
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