One pricing strategy for firms with market power is price discrimination. While this term sounds rather ominous and almost illegal, price discrimination is both legal and ethical. Price discrimination exists when a firm offers the same product to different customers at different prices. There are three types or levels of price discrimination: First degree Example: a buyer negotiates the price when buying a new car or a house Second degree Example: buy one/get one free Third degree Example: discounted prices offered to a group, such as AAA members or Sam's Wholesale Club.
In your post, respond to the following points about price discrimination:
1.) Examine in the restaurant industry. What conditions exist for price discrimination?
2.) Consider where and how you shop. Give one example of each type of price discrimination you have experienced.
3.) Consider online auction sites such as eBay. Do such sites make it easier or harder for traditional retailers and wholesalers to engage in profitable price discrimination