Price discrimination: 3 conditions

1
Price discrimination 3 conditions

• Different buyers with different demand
  elasticities.
• Seller knows and understands differences between
  buyers.
• Seller can prevent resale.
• Seller can do spin control

2
Forms personal discrimination

• Haggle-every-time
• Give-in-if-you-must
• Size-up-his-income
• Measure-the-use

3
Forms group discrimination

• Kill-the-rival
• Dump-the-surplus
• Promote-new-customers
• Favor-the-big-ones
• Divide-by-elasticity

4
Forms product discrimination

• Pay-for-the-label
• Clear-the-stock
• Peak-OffPeak
• Reduced/Full Feature set (versioning)
• Targeted edition

5
Can we always identify discrimination?

• Discrimination is measured not in terms of
  absolute price but WRT cost
• Costs may vary for different buyers
• Costs may be hard to determine
• Eg. shared/joint costs

6
Varian returning to the assumptions

• Can we identify willingness to pay? How?
• If we cant, can we use Goldilocks pricing?

7
Varian product-based discrimination

• Crippling
• Different/subtracted value
• Having refused the poor what is necessary, they
  offer the rich what is superfluous?

8
Tying and bundling

• Allows bundled product to be sold at the
  average willingness to pay, where separate
  products have widely differing demand elasticities

9
Versioning some subtler aspects

• Without versioning, the low end of the market may
  not be served
• Features, value adds, and the order in which to
  do it