Consider Three Pricing Strategies That the Firm Can Pursue

question 196

Multiple Choice

Consider three pricing strategies that the firm can pursue:
a. optimal two-part tariff pricing
b. perfect price discrimination
c. single-price monopoly pricing.
Of these three strategies, which is least likely to benefit society as a whole?

• A) a two-part tariff pricing because consumers have to pay a fixed fee in addition to a per-unit price
• B) perfect price discrimination because those willing to pay higher prices are forced to subsidize those who are not
• C) Both perfect price discrimination and two-part tariff pricing do not benefit society because the entire consumer surplus is extracted by the producer.
• D) single-price monopoly pricing because there are mutually beneficial trades (between consumers and seller) that are not exploited

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Definitions:

Wholesaler

A person or company that buys goods in large quantities from manufacturers and sells them in smaller quantities to retailers or other businesses.

Directly To Consumers

A business model where products or services are sold directly from the manufacturer or service provider to the consumer, bypassing traditional retail intermediaries.

Monetary Incentive

Financial rewards given to employees, customers, or other stakeholders to encourage specific behaviors or outcomes.

Reward Power

A type of marketing channel power that occurs when the channel member exerting the power offers rewards to gain power, often a monetary incentive, for getting another channel member to do what it wants it to do.