Use the law of diminishing marginal utility to explain why a pizza parlor might price pizzas in the following way: "Buy one pizza for $12, get the second pizza for $6." Why not simply charge $9 per pizza instead?
The second pizza gives less marginal utility than the first. The pizza parlor is trying to encourage consumers to buy the second pizza by charging a price that reflects its relatively lower marginal utility. If price is set equal to $9 per pizza, some consumers with low marginal valuations for a second pizza might elect not to purchase a second one. If enough customers elect not to purchase a second pizza at a price of $9, the pizza parlor might be worse off than when employing the "buy one for $12, get the second pizza for $6" strategy.
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