Lecture 5: Price Discrimination. AEM 4160: Strategic Pricing Prof. Jura Liaukonyte. Lecture Plan. HW1, HW2 Second degree price discrimination Designing pricing plans for consumers to self-select themselves Examples Third degree price discrimination Market segmenting Examples.
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AEM 4160: Strategic Pricing
Prof. Jura Liaukonyte
Induce customers to select into high and low price groups themselves.
Key constraint: you can’t make the inexpensive version too attractive to those willing to pay more.
Coupons distributed in the first half of 2009 increased 12% while the number of coupons redeemed increased 19%
Internet coupons, not favored but on the rise (83% increase since 2005)
75% of coupon users say the coupons had at least some influence on their decision to purchase a new product
Beyond the Many Faces of Price: An Integration of Pricing Strategies
The entry charge
surplus into profit
Set the unit price equal
to marginal cost
This gives consumer
surplus of (Vi - c)2/2
Set the entry charge
to (Vi - c)2/2
Vi - c
Profit from each pair of Old and Young is now d = [(Vo – c)2 + (Vy – c)2]/2