Description
1. respond to each post separately.
Why does price discrimination occur?
The reason why price discrimination occur is because it gives seller the opportunity to capture the markets consumer surplus and also allows the seller to generate the most revenue possible for a product or service. (Twin, 2022)
- Describe the conditions that must be present for price discrimination to occur.
One thing is first degree price discrimination and that occurs when business charges the maximum possible price for each unit consumed. For example, a lot of people say target charges the maximum price for all their supplies.
The second-degree price discrimination and that occurs when a company charges a different price for different quantities consumed. For example, in a retail store you cant receive the same discounts for certain brand of clothes.
- The last is third- degree price discrimination and that occurs when a company charges a different price to different consumer groups. For example, eating at golden corral seniors citizens, children 6-12 and 6 and under, and adults 12 and up has to pay different price for food and for the most part its most common
2. I believe that when Adam Smith was first fabricating the idea of the Invisible Hand, the hand likely worked in a market structure of perfect competition, which can simply be thought of as a market structure with little to no barriers to the market- some might say that today, the T-shirt designing business, or the vinyl craft business is a perfect competition market structure. Since the COVID-19 pandemic, we have seen instances of multiple small businesses opening into this type of marketing structure because it is easy, and there is not much incentive to change prices (CFI Institute, 2022).
After a few years of living past the pandemic, we have seen these same T-shirt and vinyl crafting companies jump to attract more customers towards their products over the competition, despite there being little to no difference in the service or product offered. This is a telltale sign of the second type of market structure: Monopolistic Competition (Krugman, 2002).
If I were to find myself as a manager in an oligopoly market structure of a business, I would want to stress the marketing structural differences in how decisions are made, particularly towards output, advertising, resource use, and pricing. See, in an oligopoly, the fine line of forming a cartel is very likely to be crossed without checks and balances. What do I mean? Well, lets look at one historically oligopoly and see if they sound familiar. My favorite oligopoly occurred due to John D. Rockefeller. His monopoly grew so large that he was forced to break his Standard Oil Company into smaller, rebranded companies- Shell, Total, BP, Exxon, and Chevron to name a few (an oligopoly) (Helena, 2021). In current times, we see evidence of an oligopoly through shareholders; oftentimes a CEO will purchase stock in a similar company to keep an eye on the competition, which in my opinion is collusion (What are your thoughts?). So in short, if I were to walk the line in a company that could potentially collude, I would stress the need for diversity in the companys products to my management team, I would watch the prices of competitor goods and try to promote seasonal discounts to cut the competition without in turn cutting myself off from the market and triggering a price war, and most importantly, I would urge my management to adhere from forming a cartel which could potentially be the bane of the companys existence, and I would market my product as different as possible so that both the consumer market and government alike did not try and audit my company for collusion with the similar competition.
In conclusion, there is a fine line between the invisible hand and a corrupt fist that dominates the market, and as future business leaders of this nation, it is up to us to be the change that we want to see. To avoid a collision; to promote equality and diversity.
