3. The pricing department in your business insists on charging one price to all

Question

3. The pricing department in your business insists on charging one price to all customers in your market, regardless of willingness to pay. Would you agree? How would you suggest your firm to use consumer surplus and elasticity to offer different pricing strategies in order to increase profitability? What specific policies would you recommend so that your business can profit from direct and indirect price discrimination, as well as ‘more realistic and complex pricing’ in order to increase profits?

Explanation / Answer

I will agree to the proposal. I can use the two- part tariff to maximize the profit. Where I will be charging an entry or a fixed fee and charging same price to all. The fixed fee will be the consumer surplus of the people with highly elastic demand. The another policy that I will suggest is the block level pricing that is pricing according to the quantity or charging different prices to people with different demand groups.

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