Why does price discrimination work in the sale of seats to children and adults at baseball games, but not to the sale of food at concession stands to children and adults at baseball games?
What will be an ideal response?
There are three conditions that need to be met for price discrimination to work: (a) the business has monopoly power; (b) it offers different prices to groups of consumers (adults or children) based on the price elasticity of demand for baseball games among children and adults; and (c) there is no resale or transfer of the product from children who buy it at the lower price to adults who must buy it at the higher price. In the case of seats to baseball games all three conditions hold. In the case of food concessions, the third condition does not hold. If a child bought food at a lower price than an adult, they could just give the food to the adults who took them to the game. This transfer would undercut the price discrimination power.
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What will be an ideal response?
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Answer the following statement true (T) or false (F)