Article Summary Brandeis University Economist Benjamin Shiller Has Written a Paper Which

question 75

Multiple Choice

Article Summary
Brandeis University economist Benjamin Shiller has written a paper which explains how Netflix could combine demographic data with customers' Web browsing habits to more accurately predict how much a customer would be willing to pay for a Netflix subscription, and how using this method of first-degree price discrimination would generate higher profits. Shiller explains that the more information a company has about its customers, the better it is at being able to set prices to increase profits. As he stated in his paper, "Using all variables to tailor prices, one can yield variable profits 1.39 percent higher than variable profits obtained using non-tailored 2nd degree price-discrimination. Using demographics alone to tailor prices raises profits by much less, yielding variable profits only 0.14% higher than variable profits attainable under 2nd degree [price discrimination]."
Source: Brian Fung, "How Netflix could use Big Data to make twice as much money off you," Washington Post, September 4, 2013.
-Refer to the Article Summary above.The pricing method described in the article is referred to as first-degree price discrimination.First-degree price discrimination is also known as

• A)arbitrage.
• B)perfect price discrimination.
• C)odd pricing.
• D)two-part tariff pricing.

Calculate allocated expenses based on given allocation bases such as floor space, employee count, or another specific factor.

Identify differences between service departments and production/operating departments.

Calculate the return on investment (ROI) for investment centers.

Understand the implications of allocation choices on departmental and company-wide financial reports.

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