For direct price discrimination to work a. The firm need not be able to identify the members of the low-value group b. The firm be able to charge the low-value customers a lower price than the higher-value customers c. The firm need not worry about any arbitrage since all its customers are charged the same price d. It needs to be too complicated for the customers to understand

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18 July, 09:20

For direct price discrimination to work a. The firm need not be able to identify the members of the low-value group b. The firm be able to charge the low-value customers a lower price than the higher-value customers c. The firm need not worry about any arbitrage since all its customers are charged the same price d. It needs to be too complicated for the customers to understand

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Stevens · Answer 1

The correct answer is letter "B": The firm be able to charge the low-value customers a lower price than the higher-value customers.

Explanation:

Price discrimination is the practice by which producers charge different prices to different consumers based on factors such as age, income or location to mention a few. This differentiation in prices is always justified by producers with one of those factors otherwise the approach would be considered illegal.

Direct price discrimination is carried out when the firm charges lower prices to an unfavored sector of the market keeping the regular price in sectors where income is higher.