Author Question: In the Sunday newspaper, there are usually coupons that you can clip and take to the store to save ... (Read 62 times)

folubunmi · **on:** Jul 1, 2018

In the Sunday newspaper, there are usually coupons that you can clip and take to the store to save money on products. Anyone can buy a newspaper, and the value of the coupons easily exceeds the price of the newspaper for most consumers.

Is this an example of price discrimination? Explain.

Question 2

Should a monopoly charge low introductory price in a two-period model?

A) Yes, if the extra profit in the second period is greater than the foregone in the first period.
B) Yes, if the demand in the second period is greater than the demand in the first period.
C) No. The first period profit is counted more.
D) No. Profit maximization decisions should be made separately.

cpetit11 · **Reply #1 on:** Jul 1, 2018

Answer to Question 1

Yes, it is. Consumers with more time are likely to have a more elastic demand for products, and thus they are willing to clip the coupons (and may not buy except at the lower price). Other consumers with less time won't deal with the coupons and thus will pay a higher price. This is essentially the same idea as movie matinee pricing.

Answer to Question 2

A