Bree\'s Bait Shop is a successful store that specializes in highly effective fis
ID: 1101390 • Letter: B
Question
Bree's Bait Shop is a successful store that specializes in highly effective fishing tackle. Bree has employed a high-tech computer tracking system that allows her to separate her customers into two different groups of consumers with differing price elasticities of demand. She is interested in increasing her profits through price discrimination and approaches your marketing firm for advice. Assuming her demand curve is downward sloping, you tell her there is one more crucial piece of information you must have in order to advise her. You ask her: What is your current profit? What are your fixed costs? Are you able to prevent selling between customers? Are you currently producing where P=ATC?Explanation / Answer
Are you able to prevent selling between customers
If selling between customers is possible than the price discrimination will not be sucessful, as the people who are charged lower price will buy the products and sell to the customers who are paying higher price. This is known as setting up of a secondary market.