Question

Each of the following would be a form of price discrimination except ______. a) providing low-priced meals to senior citizens who dine before 6 p.m. b) charging higher airfares to business travelers than to vacationers c) charging one high price to all customers d) charging adults more than children for movie admissions

Short answer

The correct answer is c) Charging one high price to all customers, as it does not represent price discrimination since the company charges the same price to every customer, regardless of their willingness or ability to pay.

Step-by-step solution

Option a) Providing low-priced meals to senior citizens who dine before 6 p.m.

This option is a form of price discrimination, as the restaurant is offering a lower price to a specific group of customers, namely senior citizens who dine early. By offering a lower price, the restaurant is aiming to attract more senior customers who may have a tighter budget or prefer to eat earlier in the day.

Option b) Charging higher airfares to business travelers than to vacationers

This option is also a form of price discrimination. Airlines often charge higher airfares to business travelers, as they are generally more willing and able to pay higher prices for their tickets. Vacationers, on the other hand, may be more price-sensitive and may choose a different airline if the prices are too high. This strategy allows airlines to maximize their revenue from different customer segments.

Option c) Charging one high price to all customers

This option does NOT represent price discrimination, as the company is charging the same price to every customer, regardless of their willingness or ability to pay. In this situation, the company is not taking advantage of different customer segments and may miss out on potential revenue.

Option d) Charging adults more than children for movie admissions

This option is a form of price discrimination, as the movie theater is charging different prices for the same service based on the age of the customer. This strategy recognizes that children may be less willing or able to pay the full adult price, and by offering a lower price for children, the movie theater can attract more families to their screenings. Based on our analysis, the correct answer is: c) Charging one high price to all customers

Key concepts

Senior Citizen Discounts

Senior citizen discounts are a common example of price discrimination where businesses offer lower prices to older customers. This strategy is based on the recognition that seniors often have a fixed or limited income and can be more price-sensitive. By offering reductions to this group, businesses can attract more senior customers, especially during less busy times.

For instance, restaurants might provide these discounts before the dinner rush to fill tables that would otherwise remain empty. Senior discounts also help create goodwill among a demographic that values appreciation and respect.

• Attracts price-sensitive seniors
• Fills gaps during off-peak hours
• Enhances business image

Airline Pricing Strategies

Airline pricing strategies are a textbook example of price discrimination tailored to different customer segments. Airlines often price tickets based on the purpose of travel, distinguishing mainly between business and leisure travelers. Business travelers typically book closer to the departure date and have less flexible schedules, making them less price-sensitive.

Airlines capitalize on this by charging higher fares for business travelers while offering promotions and lower prices to vacationers who book earlier and can plan around flexible travel dates. This strategic pricing approach helps airlines maximize revenue and fill seats across flights.

• Differentiates between business and leisure travelers
• Utilizes demand-based pricing
• Maximizes revenue potential

Movie Ticket Pricing

Movie theaters practice price discrimination by offering varied ticket prices based on age, such as charging adults more than children. This reflects the understanding that different age groups have different price sensitivities. Children, for example, might not have personal income or the willingness to pay the same as adults.

Reduced prices for children encourage families to attend movie screenings more often, increasing overall ticket sales. By acknowledging these varying abilities and willingness to pay among customers, theaters aim to accommodate diverse audience segments and boost attendance.

• Adjusts pricing based on age
• Encourages family attendance
• Increases total ticket sales

Customer Segmentation

Customer segmentation involves dividing potential customer bases into groups based on certain criteria such as age, income, or purpose of purchase. By doing so, businesses can tailor pricing strategies to maximize profits. Each segment has distinct needs and behaviors.

Effective segmentation allows companies to align their marketing, sales, and pricing strategies with specific target groups, ensuring a match between customer demands and company offerings.

• Enables targeted pricing strategies
• Matches customer needs with company offerings
• Maximizes sales and profitability