a. It is relatively clear why price discrimination may be good for firms. But what about consumers? Do you think consumers benefit or are hurt when the firm is able to charge a different price to different customers?
b. It is often noticed that prices are much higher in many industries than economic theories would imply. One argument some have put forth for why this is the case is that “prices signal quality.” Therefore, on the margin, firms price a bit higher in an effort to improve the brand’s image in the consumers’ eyes.
•Do you agree with this?
•When do you think “price signaling” might actually work?
When might it not work?
•Do you have any examples?