ECON Price Discrimination Strategy in Firms Discussion

Although monopolistic firms are price makers, in that they have the power to influence the price of their product in the market, some firms maximize profits through price discrimination. Price discrimination occurs when firms charge buyers different prices for the same goods, based on how much the buyer is willing to pay.

Consider this scenario and answer the questions that follow.

Each of the following students has the opportunity to travel back in time.

• “Ronnie” wants to travel back in time to see the dinosaurs; he is willing to pay as much as $200 to use the time machine.
• “Bobbi” wants to relive this semester; she is willing to pay up to $150 for time travel.
• “Ricky” can’t wait for the semester to end; he is willing to pay up to $125 to use the time machine.
• “Micah” just wants to get through this class period; she is willing to pay up to $100 to use the time machine.

The demand curve for time travel is:

Price

Quantity

1

$200

2

150

3

125

4

100

Based on this information, make a case for or against price discrimination. Use equations and/or graphs to justify your answer.