What are examples of how a company might limit resale of an item or service to lock in their profits from price discrimination?One of the necessary conditions for price discrimination is that the...

What are examples of how a company might limit resale of an item or service to lock in their profits from price discrimination?

One of the necessary conditions for price discrimination is that the company has to assure that the orginial buyer connot resell the product or service and take away the company's profits.

Asked on by Mizdee

1 Answer | Add Yours

pohnpei397's profile pic

pohnpei397 | College Teacher | (Level 3) Distinguished Educator

Posted on

In this question, you are asking about how firms that engage in price discrimination can prevent their customers from engaging in arbitrage. The most common ways to prevent this center around checking the customer to make sure that they belong to the market segment to which they purport to belong.

For example, Disneyland sells tickets of different prices to people of different ages.  Ticket takers at the Disneyland entrance pay attention to ensure that there are not adults who are entering the park using a child-priced ticket.  A similar thing happens when establishments require senior citizens to show ID to prove their age in order to receive discounts.  This sort of checking of membership in a particular segment is the most common example of how companies try to prevent resale of the good or service that they are selling.

Sources:

We’ve answered 318,916 questions. We can answer yours, too.

Ask a question