Asked by Mackenzie Magaoay on May 29, 2024
Verified
For direct price discrimination to work
A) The firm must be able to identify the members of the low value group
B) The firm must charge a single price to all its customers
C) The firm need not worry about any arbitrage since all its customers are charged the same price
D) The firm should charge a higher price to those customers with the most elastic demand
Direct Price Discrimination
The practice of charging different prices to different consumers for the same good or service, based directly on the willingness of each customer to pay.
Elastic Demand
A situation where the demand for a product or service varies significantly in response to changes in price.
Low-value Group
A classification referring to items or individuals perceived as offering less benefit, importance, or financial value compared to others.
- Determine the requirements that must be met for price discrimination to be successful.
Verified Answer
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Final Answer :
A
Explanation :
Direct price discrimination requires the ability to segment the market and identify which customers are willing to pay more or less. Charging different prices based on this segmentation is essential, making it necessary to identify members of different value groups, such as a low value group.
Learning Objectives
- Determine the requirements that must be met for price discrimination to be successful.