PRIN OF MICROECONOMICS
2nd Edition
ISBN: 9780393914085
Author: coppock
Publisher: Norton, W. W. & Company, Inc.
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Question
Chapter 11, Problem 1QR
To determine
Challenges that a price maker has to overcome for effective
Expert Solution & Answer
Explanation of Solution
Price discrimination is the practice of charging different prices for the same commodity from different consumers. In order to set effective price discrimination, the price maker has to overcome certain challenges.
First, the firm has to differentiate the group of consumers with different elasticities of
Second, the firms that engaged in price discrimination should need the ability to prevent arbitrage. This means that the firms have to prevent the activities like resale of the commodity to restrict money creation for those who are buying the commodity at a lower price.
Economics Concept Introduction
Price discrimination: Price discrimination is the practice of charging different prices for the same commodity for different consumers.
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