Consider the information of two different firms below in answering the succeeding question regarding the three different varieties of price discrimination. Case Study Firms with market power find it profitable to sell the same product to different consumers or groups of consumers at different prices. This practice is called price discrimination. Price discrimination occurs only when price differences are based on different buyers' valuations of the same product. If price differences are based on cost differences they are not discriminatory. Firm A: A local supermarket called "Discount Warriors" sells all of your daily grocery needs under one roof. "Discount Warriors" is known in their community for the great discount deals that they offer. The newest deal states that shoppers can buy six bottles of red wine, valued at R50 per bottle, for only R200.00. Shoppers, however, need to purchase six bottles of wine or pay the original R50 per bottle if they decide to purchase less than six bottles. Firm B: A restaurant in Jeffery's bay called "Kitchen Window" is a beachside restaurant known for its superb cuisine. The town is a popular holiday destination, and the restaurant generates the most profit during the December holidays. "Kitchen Window" charges holiday customers more during peak times in December as opposed to the lower rates charged to locals during off-peak periods. Charging higher prices are possible as customers during the holiday period are less sensitive to price changes. Besides, charging different rates to different consumers and at different periods, "Kitchen Window" offers both student and pensioner discounts on Monday mornings. The restaurant charges lower prices to both seniors and students due to the sensitive nature these market segments have to changes in price. 12.1. Given the information for firm A, answer the following questions: 12.1.1. Identify and define the type of price discrimination undertaken by firm A. Substantiate your answer for (12.1.1.) with reference to the provided extract and appropriate economic theory. 12.2. Given the information for firm B, answer the following questions: 12.2.1. Identify and define the type of price discrimination undertaken by firm B. Substantiate your answer for (12.2.1.) with reference to the provided extract and appropriate economic theory.
Consider the information of two different firms below in answering the succeeding question regarding the three different varieties of price discrimination. Case Study Firms with market power find it profitable to sell the same product to different consumers or groups of consumers at different prices. This practice is called price discrimination. Price discrimination occurs only when price differences are based on different buyers' valuations of the same product. If price differences are based on cost differences they are not discriminatory. Firm A: A local supermarket called "Discount Warriors" sells all of your daily grocery needs under one roof. "Discount Warriors" is known in their community for the great discount deals that they offer. The newest deal states that shoppers can buy six bottles of red wine, valued at R50 per bottle, for only R200.00. Shoppers, however, need to purchase six bottles of wine or pay the original R50 per bottle if they decide to purchase less than six bottles. Firm B: A restaurant in Jeffery's bay called "Kitchen Window" is a beachside restaurant known for its superb cuisine. The town is a popular holiday destination, and the restaurant generates the most profit during the December holidays. "Kitchen Window" charges holiday customers more during peak times in December as opposed to the lower rates charged to locals during off-peak periods. Charging higher prices are possible as customers during the holiday period are less sensitive to price changes. Besides, charging different rates to different consumers and at different periods, "Kitchen Window" offers both student and pensioner discounts on Monday mornings. The restaurant charges lower prices to both seniors and students due to the sensitive nature these market segments have to changes in price. 12.1. Given the information for firm A, answer the following questions: 12.1.1. Identify and define the type of price discrimination undertaken by firm A. Substantiate your answer for (12.1.1.) with reference to the provided extract and appropriate economic theory. 12.2. Given the information for firm B, answer the following questions: 12.2.1. Identify and define the type of price discrimination undertaken by firm B. Substantiate your answer for (12.2.1.) with reference to the provided extract and appropriate economic theory.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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