Explain how each of the following industries practices price discrimination.
a. Movie theaters
b. Airlines
c. Auto dealers
d. U.S. Postal Service
What will be an ideal response?
a. Movie theaters charge different prices for seniors and children, on one hand, and the rest of the population, on the other, even though the cost of showing the movie is independent of the age of the audience.b. Airlines charge different prices for seats on the same plane, depending on when the ticket was purchased, how long the traveler will be staying at the destination, etc. Of course, the cost of operating the plane is independent of these variables.c. Auto dealers always try to extract as much money from each customer as possible, charging an almost infinite variety of prices for the same model.d. The U.S. Postal Service charges the same price for a first-class letter, regardless of whether it is traveling across town or across the country.In each of these cases, price discrimination is present because the seller charges different prices for the same good or service, or, as in the case of the Postal Service, the same price is charged for services that cost varying amount.
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