Find an example or two of price discrimination in the real w

Find an example or two of price discrimination in the real world.

Describe how the company is attempting to price discriminate: Into what groups is the firm attempting to place the consumers?

What is the firm using to decide into which group any particular consumer is placed?

How are the groups charged different amounts?

What prices are charged to the various groups?

Identify anything else you feel is important to describe the firm’s strategy.

Examine the strategy: Do you think the firm’s strategy is successful? Does it seem likely that it is increasing the firm’s profits? Is the separation into groups perfect or are there some errors? Can you improve on the firm’s strategy?

Solution

An example of price discrimination in the real world is hardcover and paperback books. This is more common with popular titles. For example, Dan Brown\'s Inferno was released in hardcover. It was initially done to capture the die-hard fans who are willing to pay higher prices. The company Doubleday divided the consumer of Dan Brown\'s book into die-hard fans and then the rest. The firm is using past sales record to decide into which group any particular consumer is placed. The firm charges different prices to the different customer by first launching the hardcover books and then the paperbacks. In the case of Inferno, they released paperbacks much later than the other books of Dan Brown. The first group which is likely to buy hardcover books are charged 3 times more than the price of paperbacks.The Firm\'s strategy seems to be working because Dan Brown has huge fan base. Most of these ardent fans bought the book in hardcover. The firm\'s strategy is successful. It is likely that the price discrimination is increasing the firm\'s profits. The separation into the group is perfect because the fans of Dan Brown are die-hard fans and then the others. There is no middle group.