Questions on price-discrimination
1. A restaurant offers meal which so-called ‘tea’ from 2:00p.m to 6:00p.m. The
price of tea is much lower than the total amount a customer has to pay if he
orders normal meal. Is this price discrimination?
Answer:
Price discrimination is a situation under which the seller charges different prices on
the same good for different consumers, not due to difference in costs. (2)
No, it is not an example of price discrimination. (1)
As all people pay at the same lower price from 2:00p.m to 6:00p.m for tea sets, the
sellers have not charged different prices for different customers.(1)
Besides, the tea set provides a smaller quantity of food than the normal ones.
Therefore, different goods and services (1) are provided when compared with the
normal meal. Cost of production will also be lower for tea set than the normal meal.
(1)
2. A beauty salon, My Beauty, provides services for a frequent customer with
discounts of 20 per cent. Therefore, in this case, price paid by a frequent
customer will be much lower than that of a normal one even if they enjoy the
same beauty treatment.
Answer:
Price discrimination is a situation under which the seller charges different prices on
the same good for different consumers, not due to difference in costs. (Optional as it
is already mentioned in Q1)
Yes, it is price discrimination (1) because
the frequent customer can enjoy discount and thus a lower price for beauty treatment
in salon. (1)
Besides, as the question mentioned, both frequent customer and normal customer
enjoy the same beauty treatment which means the same good. (1)
For the same beauty treatment, quantity and quality of goods and services will be the
same for both customers. Therefore, the cost of production should be the same. (1)
It shows the salon charges different customers (the frequent and normal ones) (1)
different prices on the same beauty treatment not because of different production
costs, but a better relationship built between the staff and customer or promises made
by the staff. (1)