For each of the following products, write a few sentences answering the following questions:
• Is price discrimination of any sort feasible?
• If price discrimination is feasible, which of these pricing approaches would you consider
using: market segmentation by location or time, two-part tariffs, limit pricing, penetration
pricing. Note that I am not asking you to tell me if the approach is definitely worth doing
– you would need more information to decide that. I am only asking if you should give
serious consideration to the approaches.
To determine whether price discrimination is feasible for each of the products and which pricing approaches should be considered, we need to understand the nature of the products and the target market. Let's go through each product and analyze the possibilities:
1. Luxury Cars:
- Feasibility of price discrimination: Price discrimination is feasible for luxury cars as they cater to customers with varying price sensitivity. Brand reputation, features, and exclusivity provide opportunities to differentiate pricing.
- Recommended pricing approaches: Market segmentation by location or time can be a suitable approach for luxury cars. Different markets or seasons may have varying demand and purchasing power, allowing for different pricing strategies.
2. Prescription Medications:
- Feasibility of price discrimination: Price discrimination for prescription medications is challenging due to government regulations and universal healthcare systems in some countries. Patents and exclusivity periods may offer limited opportunities.
- Recommended pricing approaches: Penetration pricing could be considered as a way to gain market share upon product launch or when facing strong competition. However, careful consideration of legal, ethical, and public health aspects is necessary.
3. Bottled Water:
- Feasibility of price discrimination: Price discrimination is feasible for bottled water due to varying consumer preferences, brand perception, and market segmentation based on geography or demographic factors.
- Recommended pricing approaches: Market segmentation by location is a suitable approach for bottled water, as pricing can be adjusted based on local demand and purchasing power. Two-part tariffs, such as charging a base price for the bottle and an additional fee for delivery, could also be considered.
4. Mobile Apps:
- Feasibility of price discrimination: Price discrimination is usually feasible for mobile apps as developers have control over pricing, and users may have different preferences or willingness to pay based on perceived value.
- Recommended pricing approaches: Two-part tariffs could be considered for mobile apps, where a free or lower-priced version with limited features is offered, and additional premium features are available for purchase. This allows users to choose their preferred pricing option based on their needs and budget.
5. Airline Tickets:
- Feasibility of price discrimination: Price discrimination is widely practiced in the airline industry. Factors such as booking time, day of the week, destination, and seat class provide opportunities for different pricing strategies.
- Recommended pricing approaches: Market segmentation by time and location is a common approach in the airline industry. Prices may vary based on peak/off-peak seasons, specific routes, or different classes of service. Limit pricing, which involves setting prices strategically to deter potential competitors, could also be considered in highly competitive markets.
Remember, while these recommendations provide a starting point for considering pricing approaches, further analysis of market dynamics, competition, and customer preferences is necessary to make informed pricing decisions.