Reflect on the Following Excerpt from a Washington Post Article

question 91

Multiple Choice

Reflect on the following excerpt from a Washington Post article about dynamic pricing by online retail giant Amazon.com. Few things stir up a consumer revolt quicker than the notion that someone else is getting a better deal. That's a lesson Amazon.com has just learned. Amazon, the largest and most potent force in e-commerce, was recently revealed to be selling the same DVD movies for different prices to different customers. It was the first major Web test of a strategy called "dynamic pricing," which gauges a shopper's desire, measures his means and then charges accordingly. The Internet was supposed to empower consumers, letting them compare deals with the click of a mouse. But it is also supplying retailers with information about their customers that they never had before, along with the technology to use all this accumulated data. While prices have always varied by geography, local competition and whim, retailers were never able to effectively target individuals until the Web. "Dynamic pricing is the new reality, and it's going to be used by more and more retailers," said Vernon Keenan, a San Francisco Internet consultant. "In the future, what you pay will be determined by where you live and who you are. It's unfair, but that doesn't mean it's not going to happen."
Source: David Streitfeld, "On the Web, Price Tags Blur: What You Pay Could Depend on Who You Are," Washington Post, September 27, 2000, A1.
The producer, who can charge each customer according to his or her willingness to pay for a product, can:

• A) minimize producer surplus by using price discrimination.
• B) maximize consumer surplus by using perfect price prejudice.
• C) minimize market efficiency by using two-tiered price discrimination.
• D) maximize profits by using perfect price discrimination.
• E) minimize loss by using perfect price determination.

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Definitions:

Human Capital

The collective skills, knowledge, and abilities of an organization's workforce, regarded as an economic asset.

Abilities

The skills and competencies that enable an individual to perform actions or tasks effectively.

Skills

Abilities and expertise developed through practice and education.

Consumer-To-Consumer Retail

Consumer-to-consumer retail involves transactions between consumers, typically facilitated by third-party platforms or marketplaces that enable individuals to sell and buy products or services from one another.