Managerial ECO Week 5

The idea that transactions in a marketplace work like an invisible hand is to some extent the idea that when a person chooses to buy an item at a given price, they are happy with the deal. There is no coercion. If the person really does not like the deal, they simply walk away.

This week's discussion will give you an opportunity to explore direct and indirect price discrimination within the context of a hypothetical scenario.

Instructions

For this discussion, use the following hypothetical scenario as the basis for your response:

Your business partner is strongly opposed to your proposal to charge your largest customers lower prices for your web-based services than you will charge your smaller customers. She is arguing it is unethical, unfair, and possibly illegal.

Address the following in your discussion post:

• Make a case that both groups of customers will be satisfied with the deal and that this is a perfectly legal form of pricing in a business-to-customer relationship.
  • What degree is this type of price discrimination?
  • How will the plan increase revenue?
  • Why will both groups of customers be satisfied with the deal?
  • Why is this a legal form of pricing?
• Use evidence from your textbook or other reputable sources to support your case to your business partner.

Note: In your discussion posts for this course, do not rely on Wikipedia, Investopedia, or any similar website as a reference or supporting source.